India Wholesale Inflation at Record Low Adds Easing Pressure

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India’s wholesale prices dropped more than estimated, in line with retail inflation, adding pressure on central bank Governor Raghuram Rajan to cut interest rates.

Wholesale prices fell 4.05 percent in July from a year earlier, the Commerce Ministry said in a statement on Friday, the steepest fall in data going back to 2005. The median of 33 estimates in a Bloomberg survey of economists predicted a 2.9 percent decrease.

Prime Minister Narendra Modi’s government reiterated calls to lower one of Asia’s highest borrowing costs after data on Wednesday showed consumer inflation was lower than anticipated. Easing price pressures and a slide in China’s yuan has increased speculation that Rajan would cut interest rates for a fourth time this year.

“This new data has just added to the expectation that RBI should now not wait any further and should announce an inter-meeting rate cut,” Richa Gupta, senior director at Deloitte in India, told Bloomberg TV India. Rajan’s focus, however, will be wider because the central bank needs to assess the yuan’s moves to decide on an appropriate exchange rate, she said.

Rajan left the benchmark repurchase rate unchanged at 7.25 percent on Aug. 4 as he sought more clarity on the impact of a poor monsoon on food inflation, and the timing and magnitude of an expected increase in U.S. rates. The Reserve Bank of India forecast CPI at 4 percent in August before rising toward its 6 percent target for January.

Most of 18 analysts in a Bloomberg survey conducted after the CPI data predict Rajan will cut borrowing costs as early as the next meeting on Sept. 29. Five say he may opt for another unscheduled cut, with some saying he’ll wait for one more month of inflation data.

Food prices fell 1.16 percent in July from a year earlier and fuel and power dropped 12.81 percent, Friday’s wholesale price data show.

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