India’s wholesale price inflation is likely to accelerate in the coming months of this year, suggesting that the Reserve Bank will refrain from loosening monetary policy any further, Shilan Shah, an economist at Capital Economics, said.
Wholesale price inflation quickened to 3.2 percent in August from 1.9 percent in July, official data from the Ministry of Commerce & Industry showed on September 14.
The upward trend in August was largely driven by a jump in food inflation, to 5.8 percent from 2.1 percent.
“A surge in the wholesale price of onions and tomatoes amid recent supply disruptions was the key factor behind this,” Shah observed.
Capital Economics’ measure of core inflation also rose notably from 2.2 percent to 2.6 percent – its highest rate since November 2014.
Looking ahead, the WPI inflation will continue to rise in the near term, the economist pointed out.
Firstly, unfavorable base effects caused by the drop in food prices in the second half of last year will push food inflation higher.
Besides this, core price pressures could pick up a little further over the coming months.
Although wholesale price inflation is less important for policymaking than CPI Inflation, the central bank is likely to take heed of the rise in August.
“And with CPI inflation having also accelerated last month, we think that the central bank will refrain from loosening monetary policy any further,” Shah predicted.
Capital Economics expects the repo rate to remain on hold at 6.00 percent over the next 12 months.
Source: RTT News