CPI Inflation for October 2017 today; here's what analysts expect

The Ministry of Statistics and Program Implementation (MOSPI) will be presenting India's consumer price index (CPI) or retail inflation data for the month of October 2017 on Monday.

Ahead of the CPI numbers, Indian markets were trading on a negative note with Sensex shedding over 85 points or 0.26% trading at 33,229.60 and Nifty giving away 40 points or 0.38% trading at 10,282.05 at 1305 hours. 

CPI for the month of September 2017 came in stable at 3.28% - compared to 4.39% in the same month of last year and 3.36% in August 2017.

source: tradingeconomics.com

Core inflation which excludes food and fuel & light - has been witnessing an increasing trend since July’17 and has risen to 4.6% in the current month. However, it has not reached the levels witnessed in Mar’17 when it reached.

Aditi Nayar Principal Economist at ICRA for September data said, “The CPI inflation mildly trailed estimates for September 2017, on the back of the downward revision in the print for August 2017, and an unexpected easing in food inflation.”

She added, “The mild easing in food inflation in September 2017 relative to the previous month, was offset by the considerable rise in inflation for housing, on the back of the HRA revision, as well as fuel and light, and pan, tobacco and intoxicants.”

The Reserve Bank of India continues to fear that rising consumer prices will threaten the central bank's inflation target of 4% which led the monetary policy committee (MPC) vote for status quo in the October 2017 policy.

Urjit Patel governor of RBI said, “It is important to recognise near- and medium-term risks to the inflation outlook.”

RBI said that inflation is expected to rise from its current level and range between 4.2-4.6% in the second half of this year, including the house rent allowance by the Centre.

Nikhil Gupta and Rahul Agrawal analysts at Motilal Oswal said, “Although headline inflation is expected to rise gradually in 2HFY18 on accountof an adverse base effect, it should remain in line with the RBI’s projections.However, we believe that there are downside risks to the RBI’s growthprojections, leaving room for interest rate cuts.”

Nayar said, “The staggered impact on the housing index of the CPI, of the revision in HRA of central government employees, is likely to push up housing inflation further over the coming year. Moreover, the pass-through of the goods and services tax (GST) to final prices of various goods and services may not be complete. Overall, we expect the CPI inflation to cross 4.0% in the ongoing quarter and exceed 4.5% in March 2018.”

Care Ratings said, “We expects inflation to be around 4.-4.5% by the end of the fiscal year. With inflation unlikely to see moderation during October.”

Lastly, a Reuters poll having over 30 economists projects consumer price inflation at 3.46% in October from a year ago, up from 3.28% in September.