India Aug inflation falls below c.bank target despite rupee slide
* August CPI inflation 3.69 pct y/y vs 4.17 pct in July
* Rate below central bank's target for first time in 10 mths
* Central bank raised rates on Aug 1, next decision due Oct
By Alasdair Pal
NEW DELHI, Sept 12 (Reuters) - India's retail inflation fell
below the central bank's medium-term target in August,
increasing the likelihood it will keep interest rates on hold in
October after raising them at its past two meetings.
Consumer prices rose 3.69 percent from a year
earlier, down from July’s 4.17 percent, the Statistics Ministry
said on Wednesday.
August was the first month in 10 in which retail inflation
was below the Reserve Bank of India's medium-term target of 4
The median forecast of economists polled by Reuters for
August was 3.86 percent, with three-quarters of those polled
predicting inflation would be below the RBI's target. Forecasts
ranged from 3.55 percent to 5.40 percent.
"While weakness in the rupee adds to the upside risk,
factors such as still sanguine domestic food prices and
moderation in global commodity prices (excluding oil) are likely
to provide some relief," said Garima Kapoor, an economist at
Elara Capital in Mumbai.
Slowing inflation in food prices, which make up nearly half
of India's consumer price index (CPI), cancelled out price rises
in imported goods stemming from the weakening rupee currency
Food inflation slowed to 0.29 percent from a year earlier,
against 1.37 percent in July.
Softening inflation could give Prime Minister Narendra Modi
a boost as he faces general elections next year.
The rupee has fallen more than 12 percent against the dollar
this year to hit an all-time low of 72.92 on Wednesday. The
tumble has sparked discontent in a country that relies heavily
on imports for its fuel needs.
Nationwide protests over record petrol pump prices, partly a
result of the rupee slide, disrupted businesses and schools this
The RBI, which next meets on Oct. 5, has raised its
benchmark rate by a total of 50 basis points at its
past two meetings, to 6.5 percent, while warning about
Core inflation, which excludes the volatile food and fuel
sectors, was seen at around 6 percent, easing slightly from 6.3
percent in July, according to analysts.
The International Monetary Fund, in its annual report on
India released in August, warned that average inflation was
likely to rise to 5.2 percent in the 2018/19 fiscal year from a
17-year low of 3.6 percent in the previous fiscal year.
The IMF expects the central bank to gradually tighten
monetary policy in order to tame inflation.
India's annual economic growth surged to a more than
two-year high of 8.2 percent in the three months through June.
(Reporting by Alasdair Pal; Editing by Richard Borsuk and)
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