India: July inflation expected to rebound - TDS

Analysts at TDS suggest that India’s July inflation is expected to rebound after reaching a record low in June at 1.54% Y/Y.

Key Quotes

“The consensus is looking for CPI to accelerate to 2.0% Y/Y, hitting the lower-end of the 4±2% inflation targeting range. Still an extremely weak number by historical comparison. Most inflationary pressure is expected to come from services inflation, in particular from higher house rent allowances for public servants, and fuel prices.”

“Also, a partial reversal in vegetable prices may force faster inflation in July. Nonetheless, there are still numerous offsets at play, amongst which a favourable monsoon continues to keep food price inflation well anchored. From August onwards, however, the acceleration in inflation will be spurred by adverse base effects. Ahead of today’s CPI release, the market will look at July WPI data as an early indicator (cons: 1.4% Y/Y prior 0.90%).”