MUMBAI (Reuters) - The annual consumer price inflation INCPIY=ECI in March quickened to 8.31 percent from a 25-month low of 8.10 percent in February, driven by higher food prices, government data showed on Tuesday.
Meanwhile, core consumer prices were estimated to have risen around 7.9 percent in March from a year earlier, unchanged from a 7.9 percent rise in February, according to a Reuters snap survey of three dealers and economists.
”After a nasty surprise on the March WPI earlier today, a CPI print in line with expectation is likely to relieve investors.
The much expected uptick in CPI to 8.31 percent in March from 8.1 percent previously was driven by higher food prices including vegetables and fruits.
Within core CPI, a sub-10 percent inflation print for housing index for the second month in succession gives us confidence that softening of house rent is likely to continue unless the economy picks up very strongly in 2014/15.
Softer prices for clothing plus footwear, public transport and communication also helped to keep core CPI lower.
For next couple of months we expect headline CPI to head higher before a favourable base effect kicks in from June 2014 onwards. We still believe that a sub-8 percent CPI print is likely in 2014/15 unless weather conditions turn out to be adverse.”
A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI:
”The CPI data is positive, although headline number is slightly higher than our estimate. Core CPI was below 8 percent for the last two months, which shows underlying inflation pressure slowing down.
The components of core CPI like clothing, bedding and footwear have slowed, in line with weak demand. RBI will take comfort that its target of 8 percent can be achieved with the current rates.
Accordingly, we expect no rate change in the calendar year.”
BADRISH KULHALLI, FIXED INCOME FUND MANAGER, HDFC STANDARD LIFE INSURANCE CO
”The policy stance is not going to get swayed by these numbers. The RBI is going to be on the sidelines for the time being.
We’ll have to see how the inflation numbers develop from now on, especially the vegetable prices. The expectation for rate hikes can get built if the vegetable prices don’t come down. We have one more release of inflation data before the June policy and that would be important.”
”The (CPI) number is not showing as serious a picture as was shown by WPI, where base effect also has played a role. But there is a divergence between core CPI and core WPI movements.
I will re-assert my view that RBI will have a status quo or a prolonged pause because inflation still remains above their comfort zone.”
“By and large, there is no major uptick in retail prices. RBI’s intention has been to stay on hold for a while, and that should remain after today’s inflation numbers. It is not fair to expect policy reaction to every number. RBI is willing to stay on hold and see the impact of its past rate hikes.”
Reporting by Mumbai markets team