India: Gradual energy pass-through keeps RBI patient – DBS

DBS Group Research projects India’s March Consumer Price Index (CPI) inflation to edge up to 3.45% year-on-year from 3.2%, reflecting higher cooking gas, energy and input costs, while retail fuel and food stay benign. Precious metals’ correction tempers price pressures. The bank expects higher energy prices to filter through gradually, but sees core inflation remaining below 4%, supporting a continued neutral pause from RBI.

Mild CPI uptick with core subdued

“March inflation is expected to inch up to 3.45% yoy, from 3.2% month before, with the headline likely to partially reflect increase in cooking gas, energy index and ex-factory input costs, while retail fuel and food costs were benign.”

“Precious metals corrected in the month, which likely slowed the pace of rise in the sub-component.”

“We expect the impact of higher energy prices to gradually percolate in the coming months as replacement supplies arrive with a lag.”

“Core inflation, meanwhile, is likely to stay below 4%, reducing the need for the central bank to assume a hawkish stance in the near-term (RBI: Neutral pause).”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)