Indian Inflation Likely to Ease Amidst Food Price Rises – Reuters Poll
A recent Reuters poll suggests that Indian retail inflation is expected to ease to 5.50% in September, falling within the Reserve Bank of India’s (RBI) tolerance band. This is primarily due to moderating food price rises and government subsidies that offset the surge in costs. These findings provide insight into the current state of inflation in India and its implications for the country’s monetary policy.
Inflation Trends and RBI Policy
The RBI has maintained its monetary policy unchanged for the fourth consecutive meeting, signaling that interest rates will remain high until inflation is closer to the central bank’s target range of 2-6%. The recent poll forecasts a decline in inflation from 6.83% in August to 5.50% in September. Over three-quarters of economists predict inflation to fall below the upper end of the target range, indicating a positive trend in the economy.
Food Price Moderation and Government Measures
Rises in food prices, which constitute about half of the consumer price index (CPI), have been cooling from recent peaks. This is primarily attributed to the Indian government’s implementation of measures aimed at boosting food supply. Vegetable prices, in particular, have seen a sharp correction, contributing to the overall moderation of food inflation. However, challenges remain in addressing the persistent food inflation problem related to cereals, pulses, and spices.
Impact of Rising Crude Oil Prices
India, being the world’s third-largest oil importer, is likely to face the impact of rising crude oil prices. With oil prices trading around $90 a barrel, inflation is expected to remain elevated. Global supply concerns contribute to this upward trend in oil prices, posing challenges for the Indian economy.
Future Outlook and Economist Predictions
Economists predict that inflation will remain above 4% until at least the second quarter of 2025. The average inflation rate is expected to be 5.5% in the current fiscal year and 4.8% in the following year, according to a separate Reuters poll. The next move by the RBI is anticipated to be a cut in the second quarter of 2024.
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