April retail inflation expected to rise to 4.42% on higher oil prices
A three-month slide in India’s inflation rate likely ended in April due to higher energy prices, a Reuters poll found, which could intensify pressure on the central bank to hike interest rates.
A jump in the global price of oil, India’s costliest import, plus overestimated government expenditure and a sharp weakening in the rupee could cause the Reserve Bank of India to review its long-standing neutral stance.
The median forecast in the poll of nearly 30 economists was for April’s annual rate of consumer inflation to rise to 4.42% from March’s 4.28%.
If that is the case, April will be the sixth straight month of inflation above the RBI’s 4% mediumterm target.
The highest forecast was 5.50%. One economist saw the pace as below the RBI’s (Reserve Bank of India) target, at 3.88%, due to eased food prices.
Food and beverage inflation, accounting for nearly half of the CPI basket, fell to 2.81% in March, well below 2017’s high of 4.96%, in December.
BENGALURU:
Teresa John, an economist at brokerage Nirmal Bang, forecasts April inflation at 4.45%.
While that is below the RBI’s 4.7-5.1% target for April-September, “rising oil prices and core inflation will be a concern,” she said.
“It will not be very long before the central bank raises rates,” John predicted.
Minutes from RBI’s Monetary Policy Committee April 4-5 meeting showed members flagged multiple concerns, including an increase in minimum support prices for farmers and crude oil prices.
On Thursday, oil prices hit multi-year highs on prospects for renewed US sanctions against Iran amid an already tightening market.
“We think that the recent spell of softer inflation has now come to an end,” said Shilan Shah, senior India economist at Capital Economics, adding that interest rate hikes are likely “perhaps by October but we wouldn’t rule out an earlier move”.
According to a Reuters poll in mid-April, the RBI will keep rates on hold until the first half of 2019.