CPI inflation for September 2020 - Angel Broking

Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd

"CPI inflation for the month of September 2020 increased further to 7.34% from 6.69% in August. The CPI inflation continues to remain stubbornly higher than 6% which is the upper end of the RBI's tolerance range for inflation. Food inflation accelerated to 9.73% from 9.05% in August while the miscellaneous component which accounts for 27.3% of the CPI is also running high at 6.89% for the month of September. Clothing & footwear, Housing and fuel inflation at 3.04%, 2.83% and 2.87% are however helping to keep a lid on inflation. Though we expect the CPI inflation numbers to subside going forward as food inflation is expected to come off due to a bumper Kharif crop we believe that the core inflation will continue running high for some time to come which can keep inflation above the RBIs target rate of 4%. Therefore we believe that a rate cut is unlikely in the next MPC meeting in December. However we believe that the RBI will continue to use unconventional policy measure like TLTROs, OMOs, special OMOs etc. in order to bring down the rates at the longer end of the yield curve given that the spread between the overnight and the 10 year G-Sec is still very high at ~190bps despite the measures announced by the RBI so far in its MPC meeting last week."

Source : Equity Bulls

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