India’s headline CPI inflation likely unchanged in February

India’s headline CPI data for February is due to be released today. CPI is likely to be around 5.7% y/y, unchanged from January 2016’s print. February’s CPI figure is expected to come in at almost the same level as that of January’s after five continuous months of headline CPI increases including January 2016. An expected rise in protein prices are expected to have been countered by moderating prices of food and vegetable.

Even though pulse price inflation continues to be relatively high on year-on-year terms, easing signs are seen in the pulse price index, hence keeping the overall food inflation relatively curbed. The food price index is likely to have declined on a month-on-month basis in February for the third consecutive time.

However, the continued strengthening of core inflation is a concern. This is not unexpected as the service sector inflation is accelerating and is likely to have accelerated above 4% y/y in February. However, service sector inflation is expected to have significantly moved away from CPI service inflation.