India’s CPI Eases More Than Estimated, Supporting Rate-Cut Calls

Urjit Patel

Photographer: Dhiraj Singh/Bloomberg

India’s inflation slowed more than estimated, supporting economists’ predictions for deeper monetary easing after central bank Governor Urjit Patel made a surprise cut to interest rates this month.

Key Points

  • Consumer prices rose 4.31 percent in September from a year earlier, the Statistics Ministry said in a statement in New Delhi on Thursday
  • That’s slower than the 4.6 percent median estimate in a Bloomberg survey of 33 economists and August’s 5.05 percent rate
  • Food costs rose 3.88 percent compared with a 5.91 percent increase the previous month

Big Picture

The easing is in line with the central bank’s forecast for average 5 percent inflation October-December, which several economists -- including those at Citigroup Inc. and Nomura Holdings Inc. -- say will create room for another interest-rate reduction this year. Patel on Oct. 4 lowered the benchmark rate to 6.25 percent and signaled a looser tolerance for price pressures as policy makers look to spur investment and factory output in Asia’s No. 3 economy.

Economist Takeaways

  • "A sub-4.5 percent is not sustainable but, at the same time, inflation is no longer an issue," said Sujan Hajra, a Mumbai-based economist at Anand Rathi Financial Services Ltd. "With factory output contracting and inflation softening, it becomes necessary, and also provides elbow room for the central bank, to cut interest rates."

Details

  • The easing in the consumer food price index was led by a 7.2 percent fall in the cost of vegetables; pulses rose 14.3 percent and sugar surged 26 percent
  • Personal care costs increased 7.7 percent, education almost 5 percent and housing rose 5.2 percent
Before it's here, it's on the Bloomberg Terminal.
LEARN MORE