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Research
FYTD CPI inflation run rate to hold on to FY22 forecast of 5.5% with only a mild downside - Acuité Macro Pulse
Posted On : 2022-03-09 10:50:51( TIMEZONE : IST )
On the inflation front, the year 2022 has begun with the manifestation of the upside anticipated in CPI inflation. Jan-22 retail inflation soared to a 7-month high of 6.01%YoY from upwardly revised 5.66% (by 7 bps) in Dec-21 amidst waning of a favorable base, as incrementally the index contracted by 30 bps. With this, CPI inflation now sits at the upper threshold of 6.0% of the RBI's inflation target band.
WPI inflation eased to 12.96%YoY in Jan-22 from 13.56% in Dec-21, marking the second consecutive month of moderation. Sequentially, the index rose marginally by 0.35% compared to a contraction of 0.90% in Dec-21.
KEY TAKEAWAYS:
- As per high frequency mandi prices, vegetable prices are continuing to witness further seasonal correction in early part of Feb-22, led by tomato prices. In further support, retail price of petrol and diesel in the four metros has remained unchanged over Jan-Feb-22, which could perhaps see upward adjustment in Mar-22 post the state elections.
- For FY23, we foresee the moderation in headline CPI inflation to continue in our base scenario, albeit at a weaker pace. The RBI's estimate of 4.5% of FY23 CPI inflation in this respect, appears under whelming owing to several upside risks lurking on the horizon.
- Core inflation (i.e., CPI ex Food & Beverages and Fuel & Light indices) increased by 0.5% MoM in Jan-22 vs. 0.2% MoM in Dec-21. While the annualized rate of core inflation moderated a tad, we note that it has averaged a little over 6% in last four months.
- Pan, Tobacco & Intoxicants prices too contracted for the second consecutive month, by 0.1% compared to 0.3% in Dec-21.
- Fuel and light index rose by a muted 0.1% MoM, driven by a 5.6% contraction in price of PDS Kerosene in the month and in absence of any upward revision to retail fuel prices by oil companies ahead of state elections.
Link to the report