Acuité Ratings & Research comments on CPI Inflation - Nov'22

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

"It is a pleasant surprise to see the headline CPI inflation print at 5.88% in Nov-22 from 6.77% in Oct-22 since most market participants estimated it to be above 6.0%. This is an eleven-month low figure and is clearly driven by the faster-than-expected decline in food inflation which stood at 5.1% in the previous month. This has been due to the quick drop in vegetable prices which is a seasonal phenomenon apart from the continuing softness in edible oil prices.

Nevertheless, the core inflation figure remains high for RBI's comfort and has in fact moved up further to 6.29% in Nov-22 from 6.23% in Oct-22; on an MoM basis, the core inflation went up by 0.43%, highlighting the embedded nature of the current inflationary environment. The moderately healthy, if not strong, momentum in domestic demand is leading to the holding up of the core inflation. Also, the base factor was relatively an advantage for the Nov-22 print which may not be the case for Dec-22. Therefore, we don't expect any significant trend downward for the CPI inflation for the next few months.

Given the core inflation trajectory, we continue to forecast an average figure of 6.7% for CPI inflation in FY23. We also continue to expect another round of modest hike in Feb-23 which will take the terminal rate to 6.5% or higher."

Source : Equity Bulls

Keywords

CPI Inflation November2022 India Economy AcuiteRatings