INSUBCONTINENT EXCLUSIVE:
food costs fell and fuel prices rose at a slower pace, a Reuters poll showed, giving central bank breathing space to keep policy on hold
Inflation likely cooled to 2.20 per cent in December - close to lower end of Reserve Bank of India's medium-term target range of 2.0-6.0 per
cent - according to January 3-9 poll of 41 economists
In November, inflation was at 2.33 per cent."Food prices fell more in December
Which maybe just a seasonal thing, but I see that as main factor, a potential downside factor for inflation," said Prakash Sakpal, Asia
economist at ING.If latest consensus is realised it will mark fifth month in a row consumer price inflation has held below mid-point of
RBI's target band.Forecasts ranged between 1.80 per cent and 3.00 per cent, and suggested price pressures are easing off from earlier in
2018."Inflation has at least in second half of 2018 surprised on downside
I think it is common knowledge now that it is mainly driven by food prices," said Radhika Rao, an economist at DBS Bank."In fact, food and
beverages component in itself has been in disinflation
December will be third month running, where prices have actually declined year-on-year."Cooling inflation expectations have also been driven
by lower oil prices and a rupee currency that has managed to stabilise after a steep sell-off.Crude oil prices are down over 30 per cent
since October 3, when it hit highest in almost four years, and rupee has bounced nearly 6 per cent after touching a lifetime low of 74.48 on
October 11.According to separate Reuters polls, rupee is not expected to depreciate sharply from here and oil prices are predicted to rise
just modestly this year.Those expectations should keep inflation in check
And given concerns about a slowing economy after growth cooled sharply in July-September quarter, RBI is likely to hold interest rates next
month and move to a more dovish stance, economists say."We expect them (RBI) to move from 'calibrated tightening' to 'neutral', so a change
in stance is very much on cards," said DBS's Ms Rao."But I don't think they would go ahead and cut rates in February, but dovish language
would keep door open for easing in subsequent meetings."
