India's headline retail inflation rate fell for the third month in a row in December, coming in at 5.72 percent – 18 basis points below the consensus estimate of 5.9 percent – the statistics ministry said on January 12.
More importantly, Consumer Price Index (CPI) inflation averaged 6.1 percent in October-December, well below the Reserve Bank of India's (RBI) forecast of 6.6 percent.
any other quarter, inflation undershooting the central bank's forecasts by such a large margin would send the market's hopes soaring. However, these are extraordinary times.
"Despite two months of below 6 percent headline inflation, we think the RBI is unlikely to feel very comfortable with the details, given demand-driven price pressures remain elevated," noted Rahul Bajoria, chief India economist at Barclays.
"We expect the central bank to maintain a broadly hawkish policy stance going into the February monetary policy meeting and deliver a 25-basis-point hike, taking the repo rate to 6.5 percent," Bajoria added.
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