With CPI inflation falling to 9-month low in July, nearing the 4 percent inflation target set by the RBI, analysts expect the central bank to take a pause route for the remaining FY19. The consumer inflation, that is a benchmark for the RBI, plunged to 4.17 percent in July as against 4.9 in the previous month supported by dip in food prices, Central Statistics Office showed.
The latest fall in the consumer inflation in the second quarter of FY2019 looks all set to lag the MPC’s estimate of 4.6 percent. It reduces any possibility of hike in rates in the next policy review due October 2018, Aditi Nayar of ICRA said. However, the continued fall in rupee may add to the CPI inflation in the near term, the ICRA economist also added.
The high statistical base will help to keep the number low, CARE Rating said. However, the central bank will keep a track of these non-food components which vindicate the rate hike decision in early August, it also said.
The CPI inflation fall in July was on the expected lines, told Devendra Kumar Pant of India Ratings to The Indian Express. In the month of July, the unfavourable base effect of June last year turned out to be favourable, he said. The food inflation that has cooled down to 10 months low is expected to remain on the same lines for the coming 2 months, he added. After that, it is expected that MSP hike impact may affect inflation numbers, he also said. The commodity groups such as fuel, light and others are likely to exert pressure on CPI inflation, Devendra Kumar Pant said.
In its monetary policy review on August 1, the RBI had raised the rates by 25 basis points due to inflation related risks. It was the second rise in last two months.