India: Will December CPI inflation overshoot 7%? – Standard Chartered

Standard Chartered analysts are expecting India’s CPI inflation in December to have risen to 6.9%, the highest since August 2014 (when it last hit the 7% mark), which is due to release on 13 January.

Key Quotes

“Rising food prices, led by vegetables, remain the key driver with food inflation likely jumping to double digits after six years. Weather disruptions have hurt vegetable supply (especially onions); this has contributed significantly to the recent increase in inflation.”

“For instance, while November headline CPI inflation was 5.5%, it was way lower at 3.5% excluding vegetables. Similarly, we expect CPI inflation excluding vegetables at 3.6% in December. Prices of other food sub-components like pulses, milk, egg, meat and fish and edible oils are also witnessing upward pressure.”

“Despite the spike in food inflation, we estimate that core inflation stayed flat at near record lows of 3.5% for a third consecutive month. However, the December print could exceed the psychological 7% mark if certain risks are realised.”