Perspective on CPI Data by Rajni Thakur, Chief Economist, L&T Finance Ltd.
Below the Perspective on CPI Data by Rajni Thakur, Chief Economist, L&T Finance Ltd.
“Headline CPI inflation at 0.25% in October, its lowest reading in the series, is a culmination of many supply side factors- Prices of perishables including vegetables and fruits continue to decline on back of strong supply conditions, GST rate cuts for key consumption items since September 22nd has lowered prices of most consumer products and global uncertainties have kept fuel prices in check as well. Demand conditions, however, remain healthy as indicated in the 4% range for core inflation and key services component viz Health and Education. Going forward, trajectory for headline is expected to turnaround as base effect support starts to recede. Nevertheless, an overall positive trend in agricultural output and lower global oil prices will likely keep CPI levels close to the lower end of RBI’s target level for inflation for the rest of the current fiscal year. This definitely creates ample policy space for RBI to cut REPO rate. However, early indicators point towards strong growth momentum, which along with rising bond yields presents a tough conundrum for MPC to balance the rate cut justification and efficacy at this point.”
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