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January Inflation Data Expected to Show Moderation in Headline Figure

INDIA
Inflation data for January is on the docket shortly (12:00 GMT/17:30 IST). As per the median estimate of the Bloomberg survey of analysts, inflation likely moderated from 5.69% y/y in December to 5.00% in January. Last week, the RBI’s decision to keep the repo rate unchanged at 6.50% was interpreted by some as marginally hawkish, as there was no change to the “withdrawal of accommodation” stance that has been in place since the central bank's hiking cycle began in 2022.
  • JP Morgan expect CPI to print at 5.0% y/y. The softening in prices is underpinned by food which are projected to rise by 0.4% m/m, they say, while core prices are expected to come in at 0.3% m/m, which would translate into 3.70% y/y – the lowest print in four years.
  • SocGen say headline CPI inflation likely dropped to a three-month low of 5.1% y/y. They note that food inflation will drive headline inflation lower and will support the government’s decision to retain the export ban, which was implemented to keep inflation under control by supporting domestic supply. They say what would be comforting for the RBI would be a continued drop in core inflation, which they estimate to have dropped to well below 4.0% y/y, marking a near four-year low.
  • ANZ say inflation in December 2023 is likely to have eased to 5.0% y/y, as high food inflation abated and favourable base effects kicked in. They expect core inflation to have decelerated by 5-10bp, remaining below 4%. The price of vegetables were lower sequentially, attesting to usual winter disinflation. However, daily food price data form the Horticulture Board show that prices of other vegetables may have risen month-on-month, warranting continued monitoring. Absent any other price shock, CPI inflation is likely to align with the RBI’s 4% target by Q2 2025, ANZ add.
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