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Retail Inflation Falls To 4.31% In September, Gives Room To RBI For More Rate Cut

India’s annual consumer price inflation eased more than expected to 4.31 per cent in September, its lowest level in 13 months, helped by smaller rises in food prices

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India’s annual consumer price inflation eased more than expected to 4.31 per cent in September, its lowest level in 13 months, helped by smaller rises in food prices, government data showed on Thursday (13 October).

Economists surveyed by Reuters had expected annual retail inflation to come in at 4.80 percent last month, compared with 5.05 per cent in August.

“The decline in CPI is more pronounced than expected, probably because of a steep sequential fall in the prices of various types of pulses, vegetables and fruits. A favourable statistical base has also helped to a great extent in keeping the headline CPI print benign. Until February we are going to see benign prints in CPI, which will open up space for at least one more rate cut in FY17 under the present regime,” said Rupa Rege Nitsure, Group Chief Economist, L&T Finance Holdings.

“Basically it’s food inflation, which has always been a volatile component, driving the headline inflation lower. Our expectation is the average inflation number for this year would be 4.8 per cent, and I’m certainly not expecting any more rate cuts unless RBI decides to further cut the real (interest) rate. Any more cuts in the real rate would affect the savings rate for individuals going forward,” Investment Officer of IDBI Federal said.

“Macros are improving significantly and with food inflation now coming down, it signals macros are well in place and cost of money is definitely headed downwards. The consensus was that before March 31 we could see another rate cut by the RBI, and I think that will strengthen now,” Sanjiv Bhasin, Executive Vice-President- Markets, India Infoline, Gurgaon said.


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retail inflation cpi rbi interest rates food prices