India's annual consumer price inflation eased for a second straight month in September to 6.46 percent, its lowest level since the government started releasing the data in 2012, data showed on Monday.
The latest number was sharply lower than a Reuters poll forecast of 7.2 percent and August's revised 7.73 percent print.
“We had expected a decelaration in food inflation, but the fall in core CPI inflation is more than anticipated.
So inflation is on track to undershoot RBI's 8 percent inflation target by January 2015, and the chances to reach 6 percent target by January 2016 have improved,” said A. Prasanna, Economist, ICICI Securities primary dealership, Mumbai.
With core inflation coming off incrementally, RBI's comments on controlling inflation may get more confident. This doesn't materially change the probability of any rate cut in the near term. Markets were poised for a sub-7 percent number, and this number will add to the positive sentiment.
Rupa Rege Nitsure, Chief Economist, Bank of Baroda, Mumbai said, “The data is very favourable. The only question is about its sustainability because we know there are primarily two reasons for this kind of moderation. One, of course, is the statistical base effect. And second, there was a month-on-month significant decline in vegetable prices. But RBI has said they will wait for inflation to come down durably. So just going by one observation, they cannot take the final call. They will wait and see how data pans out post-November when base effect will wane.”
“My stance remains the same, that there will be a prolonged pause on rates. Even if inflation print turns ugly post-November or December, given the fact that industrial activity has weakened so much, they may not increase the rates. That is why I say it will be a prolonged pause,” she added.