India's retail inflation tipped to snap easing trend in April

India Inflation If the forecast materialises, it would mark the first pickup in retail inflation since January

India's headline inflation probably broke a recent slowing trend in April while industrial output likely expanded at its fastest pace in five months in March, reducing the odds of further interest rate cuts by the central bank next month.

Consumer price inflation, which the Reserve Bank of India (RBI) targets in setting interest rates, likely moved up to 5 per cent last month from a provisional 4.83 per cent in March, according to economists surveyed by Reuters.

If the forecast materialises, it would mark the first pickup in retail inflation since January.

India's statistics ministry will release the data at 1200 GMT on Thursday.

The pace of price gains in April was likely driven mostly by higher food and fuel costs. An early-summer heat wave pushed up prices for staple vegetables. Retail gasoline prices went up following a 19 per cent month-on-month increase in India's crude import prices.

Slowing inflation prompted the RBI to cut the policy repurchase rate last month by 25 basis points to 6.50 per cent, the lowest since 2011.

But with the central bank more focussed on monetary transmission, it is widely expected to keep the rate on hold at a scheduled policy review on June 7.

"The central bank is likely to adopt a wait-and-see mode in June," economists at DBS Group wrote in a note.

RBI chief Raghuram Rajan aims to cap retail inflation at 5 per cent by March 2017.

A big increase in wages and pensions of government employees later this year and a hike in service tax rates are expected to stoke price pressures, but subdued rural demand coupled with prospects of good summer rains could provide some buffer.

"In the absence of supply shocks, inflation is unlikely to pose a threat to the central bank's targets," economists at DBS Group added.

That should provide a room for another 25 basis point rate cut. A recent Reuters poll predicted that the central bank would deliver one more rate cut towards the end of this year.

The statistics ministry will also release the figures for March industrial production on Thursday. Economists polled by Reuters expect output at factories, mines and utilities INIP=ECI to grow by 2.5 per cent year-on-year, its fastest pace since last October.

This browser settings will not support to add bookmarks programmatically. Please press Ctrl+D or change settings to bookmark this page.
Topics : #Inflation | #business

Related Reading

    Show more