Easing Inflation Makes Room for India Rates to Remain Lower
(Bloomberg) -- India’s consumer prices rose at the slowest pace in five months, supporting the case for the central bank to keep interest rates lower for longer to aid economic growth.
Consumer prices rose 4.35% in September from a year earlier compared to 5.3% in August, the Statistics Ministry said in a statement Tuesday. That’s slower than the median forecast for a 4.5% gain in a Bloomberg survey of 35 economists.
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The September reading slows the pace of price-growth to Asia’s third-fastest from second, easing pressure on policy makers to choose between either combating inflation or supporting growth. One-year interest-rate swaps were at 4.07% on Tuesday, the highest since April 2020, reflecting the market’s expectations for the central bank to tighten policy amid a deluge of liquidity.
|Key points from September inflation print:|
The central bank has kept the benchmark repo rate steady at a record low 4% for eight straight meetings as it seeks to support the economy’s recovery from the pandemic shock. The monetary authority led by Governor Shaktikanta Das also cut the full-year inflation forecast to 5.3% from 5.7%.
“Repo rate movement may be pushed back a little bit more now because of the inflation print,” said Jay Shankar, head of economics research at Incred Capital in Mumbai. “But let’s not forget that from November inflation will start rising again because the base effect will vanish.”
Risks also remain in the form of a simmering energy crisis and rising commodity and input prices.
Data released separately on Tuesday showed industrial output rose 11.9% in August from a year earlier, signaling a steady economic recovery.
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