India’s RBI May Lower Inflation Forecast by 50 BPS, Says Citi
India’s central bank may lower its near-term consumer inflation forecast by as much as a half point after inflation fell in November and December, Citigroup Inc. said in a note.
(Bloomberg) -- India’s central bank may lower its near-term consumer inflation forecast by as much as a half point after inflation fell in November and December, Citigroup Inc. said in a note.
Though headline inflation has softened, the Reserve Bank of India may still have to contend with sticky core inflation, which has hovered around 6% for 15 months, Citi economists Samiran Chakraborty and Baqar M Zaidi wrote in a note released on Thursday.
Lower-than-expected retail inflation in November and December “could lead to 40-50 basis points downward revision in RBI’s inflation forecast,” the Citi economists wrote. Consumer price inflation cooled to 5.72% in December, compared to a consensus that it would remain the same as November’s 5.90%.
India’s central bank had forecast inflation at 5.9% in the January-March quarter and 5% in the April-June period, assuming a normal monsoon season and oil prices at $100 a barrel. “The risk of Mar-2023 quarter inflation being above 6% are materially low now,” the Citi economists said.
However, they wrote that “all core inflationary measures remained well above-6%. In fact, inflation was above-6% for items weighing 56% of the CPI basket in Dec. 22 – this number has remained unchanged for last five-months.”
Citi still expects a rate increase of another 25 basis points in February, when the RBI holds its next monetary policy review.
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