Inflation Higher Due to Increased Prices in Food
Rising food prices are expected to have pushed retail inflation slightly higher last month, but weaker demand prompted factories to slow output in December, a Reuters poll showed. The uptick in inflation is unlikely to change forecasts for more interest rate cuts by the Reserve Bank of India, after it made its first cut for 20 months in January, when the key repo rate was lowered by 25 basis points to 7.75 percent. The median forecast from survey of 29 economists showed annual retail inflation running at 5.4 percent last month, faster than December’s 5.0 percent but still below the RBI’s target of 6 percent by next January and significantly slower than the 7.2 percent it averaged through 2014. “We are looking at a slight pick up in food inflation, particularly driven by vegetables,” said Jyotinder Kaur, principal economist at HDFC Bank, adding that it would be some time before the rate cut’s effect showed in core inflation figures. Predictions for wholesale price inflation were similarly muted, due to the sharp fall in oil prices globally. That gauge is expected to show 0.41 percent for January, faster than December’s 0.11 percent, but it would still be one of the lowest readings since mid-2009.