Inflation data based on wholesale price index (WPI) for August hit a five year low at 3.74 percent courtesy declining vegetable prices and other food articles. August WPI inflation stood at 5.19 percent in July. A CNBC-TV18 poll estimated it to be at 4.1 percent. Food inflation in August hit a lowest level since January 2012. It eased to 5.15 percent versus 8.43 percent on a month-on-month (MoM) basis. Vegetable prices contracted 4.88 percent. Maintaining a downward trend, the onion prices contracted by 44.7 percent in August. Inflation in the fruits basket eased to 20.31 percent in August. While prices of protein rich items like egg, meat and fish contracted during the month, inflation in milk and pulses inched up to 12.18 percent and 7.81 percent, respectively, as compared to July. Further, August fuel inflation also hit a five-year low with the fuel and power group inflation declining to 4.54 percent versus 7.40 percent (MoM). June WPI inflation has been revised to 5.66 percent from 5.43 percent previously. Also Read: CPI at 8% in Jan 2015 seems a safe forecast, says Moody's "This number is much better than what we were expecting. Yes, there was a significant base effect from last year, but fall in global commodity prices is having a positive impact on WPI. The impact of cooling global commodity prices is much larger on WPI than on CPI hence the WPI correction has been much sharper, “Samiran Chakraborty, head of research, Standard Chartered said in an interview to CNBC-TV18's Latha Venkatesh and Reema Tendulkar.
Chakraborty further highlighted that the rupee was at 68/USD last year in August and today it is 60/USD, so this huge improvement in exchange rate would have also aided this fall in WPI inflation. Soumya Kanti Ghosh, chief economic adviser, State Bank of India had estimated August WPI inflation to come in at 4 percent. According to him, since WPI food inflation is declining at much faster rate CPI food component, one can hope for a sobering impact on CPI food inflation as well, which has remained at elevated levels. “International commodity and crude prices have corrected to multi-year lows. As much as two-third of global prices has impact on WPI given that on a seasonally adjusted basis, the WPI for this fiscal could be around 4-4.5 percent, “he added. Continuing his optimistic tone, he said that core inflation has trended down, so one should not be surprised if the whole year average for WPI is at around 4 percent. Core inflation was at 3. 5 percent in July. Meanwhile, Vivek Rajpal, executive director - Asia Rates Strategy, Nomura is of the view that fall in core CPI data announced last week was a bigger surprise than today's WPI data. "These numbers indicate that inflation trajectory is declining and are positive from a rate perspective, but the central bank will cut interest rates much later than it is in the price, so longer-end bonds will continue to rally. The spread between longer-end bonds and repo will compress even much ahead of the actual rate cut, whenever it gets delivered," he said. Despite WPI inflation cooling off the Indian equity benchmarks gave a muted reaction probably because the Reserve Bank of India (RBI) closely watches the CPI inflation data rather than WPI while taking a decision on interest rates. Experts see today's data as an impressive one, which indicates that the pace of growth of inflation has been slowing down, but they say one should not hope for an interest rate cut anytime soon. The next RBI monetary policy is on September 30. Read more at: http://www.moneycontrol.com
Chakraborty further highlighted that the rupee was at 68/USD last year in August and today it is 60/USD, so this huge improvement in exchange rate would have also aided this fall in WPI inflation. Soumya Kanti Ghosh, chief economic adviser, State Bank of India had estimated August WPI inflation to come in at 4 percent. According to him, since WPI food inflation is declining at much faster rate CPI food component, one can hope for a sobering impact on CPI food inflation as well, which has remained at elevated levels. “International commodity and crude prices have corrected to multi-year lows. As much as two-third of global prices has impact on WPI given that on a seasonally adjusted basis, the WPI for this fiscal could be around 4-4.5 percent, “he added. Continuing his optimistic tone, he said that core inflation has trended down, so one should not be surprised if the whole year average for WPI is at around 4 percent. Core inflation was at 3. 5 percent in July. Meanwhile, Vivek Rajpal, executive director - Asia Rates Strategy, Nomura is of the view that fall in core CPI data announced last week was a bigger surprise than today's WPI data. "These numbers indicate that inflation trajectory is declining and are positive from a rate perspective, but the central bank will cut interest rates much later than it is in the price, so longer-end bonds will continue to rally. The spread between longer-end bonds and repo will compress even much ahead of the actual rate cut, whenever it gets delivered," he said. Despite WPI inflation cooling off the Indian equity benchmarks gave a muted reaction probably because the Reserve Bank of India (RBI) closely watches the CPI inflation data rather than WPI while taking a decision on interest rates. Experts see today's data as an impressive one, which indicates that the pace of growth of inflation has been slowing down, but they say one should not hope for an interest rate cut anytime soon. The next RBI monetary policy is on September 30. Read more at: http://www.moneycontrol.com
No comments:
Post a Comment