Retail inflation at 19-month low in January; December industrial growth subdued

Retail inflation at 19-month low in January industrial output up 2.4% in December

Retail inflation at 19-month low in January industrial output up 2.4% in December

The Reserve Bank of India earlier this month eased its monetary policy, by reducing the repo rate - the key interest rate at which it lends short-term funds to commercial banks - by 0.25 per cent to 6.25 per cent. January's data is an indication that inflation, which is little over 2 percent, is very close to the central bank's lower tolerance level of inflation at 2 percent.

Inflation plunged to 1.8 per cent in January the lowest rate for two years, official statistics revealed today.

Thirteen out of the 23 industry groups in the manufacturing sector showed positive growth in December compared to the same month the previous year.

The CPI for the month of December was revised to 2.11 per cent from the earlier figure of 2.19 per cent. That was largely seen as a move by the RBI that could lead to lower EMIs (equated monthly instalments) for loan borrowers.

This year, other major central banks have also changed to a dovish stance in the face of rising worries about global growth and the impact of the U.S.

The RBI has maintained a medium-term goal of 4 per cent for consumer inflation, which it tracks primarily to formulate its policy.

"Morgan Stanley expects the USA core consumer price index (CPI) to rise 0.2 percent in January, in line with its three-month average, but sees the headline CPI falling for the fourth consecutive month to 1.5 percent from 1.9 percent". For the third quarter of 2019-20, the inflation target is set by the RBI at 3.9 per cent. Cumulatively, for April-December 2018-19, industrial output grew at 4.6 per cent against 3.7 per cent in the same period of the previous financial year.

Last week the BoE said inflation was likely to fall below 2.0 percent in coming months before picking up again.

Manufacturers' raw materials costs were 2.9 percent higher than in January 2018, the slowest increase since June 2016, the month of the Brexit referendum.

"We expect headline CPI to retreat to 1.5% thanks to lower gasoline prices", said TD Securities previewing this week's inflation report from the U.S".

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