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ICICI Securities Report
Consumer price index eases moderately in sequential terms, still uncomfortably high - Headline retail inflation eased moderately to 6.69% in August 2020 from 6.73% in July 2020 although sharply higher than 3.28% twelve months ago.
With this print, average retail inflation in Q2 FY21 and H1 FY21 so far stands at 6.7% and 6.6% respectively.
Daily food price data shows that food prices have remained elevated in the first two weeks of September 2020 as well.
Hence, we expect CPI in September 2020 to remain above 6%, taking inflation in Q2 and H1 FY21 above the upper limit of Monetary Policy Committee’s comfort zone.
In a separate data release, wholesale inflation came in at 0.16% in August 2020 reversing preceding four months’ trend of negative prints.
However, in YoY terms WPI fell from 1.17% in August 2019.
Higher inflation in manufacturing (1.3% in August 2020 versus 0.5% in July 2020) and primary articles (1.6% versus 0.6%) drove WPI higher while fuel inflation continued to be in the red.
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