Indian headline inflation eases below expectations in August

Indian headline inflation came in weaker than anticipated in August. On a sequential basis, the consumer price inflation slowed to 0.43 percent from July’s 0.94 percent. The rate was also less than the average rise of 0.86 percent sequentially in August over the past seven years. On a year-on-year basis, consumer price inflation slowed to a 10-month low of 3.69 percent in the month.

Food inflation eased for the third straight month. Among individual items, the momentum of the prices of vegetables and fruit has decelerated further in the month.

Core inflation was the most positive aspect of today’s data, easing to 5.87 percent year-on-year, a four-month low. Sequentially, core rate remained widely unchanged at 0.47 percent in the month.

Meanwhile, transportation and clothing costs rose sequentially, among other components. Other components either dropped or remained stable.

The weaker than anticipated headline data is a welcome development and might permit the central bank to keep rates on hold in 2018, noted ANZ in a research report. Nevertheless, several risks continue to be on the horizon. These include softness in the Indian rupee, higher MSPs and increased crude prices.