Food inflation to drive up India's CPI to 6.2% in Sep quarter: Morgan Stanley
Food Price Index, which accounts for nearly half of the overall consumer price basket, rose to 4.49% in June 2023 against 2.96% (revised) in May 2023. Other economists have also cautioned that inflation could cross 5% in the next two months on a continued rise in prices of vegetables, pulses and cereals.
"Even as we expect headline inflation to track somewhat higher than our previous expectation, we believe that the underlying trend in inflation remains unchanged, as reflected in core inflation forecasts," the Morgan Stanley report said. "As such, we maintain our base case of a shallow rate cutting cycle from 1QCY24.
Risks of a delayed start to the rate cutting cycle could emerge if the trailing (i.e., headline) inflation in QE Dec-23 remains above 6% (our current forecast is 5.7%)," it added. The report said that key risks in the near term stem from volatility in food inflation and changes in global commodity prices.
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