Inflation print comes lower than expected
India Dec CPI came in lower than consensus estimates with prices rising 5.72% yoy (exp 5.88% CPI est). The print lower was driven by disinflation in food and beverages where prices fell 1.35% mom. However, the core component, CPI excl f&b and fuels & lighting, continues to be sticky at 6.10%.
Prices slowed for food (4.19% vs 4.67%), pushed down by a 15.1% fall in vegetables; clothing and footwear (9.58% vs 9.83%); and housing (4.47% vs 4.57%). On the other hand, prices rose faster for fuel and light (10.97% vs 10.62%), pan, tobacco, and intoxicants (2.55% vs 2.02%), and miscellaneous (6.17% vs 6.07%) *
The 5.7% Dec print , alters the Q4 FY 23 inflation trajectory to an average of 5.36%.
RBI projects CPI inflation for Q1:2023-24 at 5.0 per cent and for Q2 at 5.4 per cent.
The current disinflation is encouraging but the core component continues to be sticky. RBI may hike repo rate by 25 bps in the forthcoming policy before a pause to assess the lagged transmission of policy and the evolving macro economic outlook.
Index of Industrial production rose 7.10% vs a contraction of 4% in Oct.
India OIS is down 5 bps beyond year 1 with 1Y at 6.595% closer to the 6.55% support and 5Y at 6.215%.
*trading economics
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