India Inflation Accelerates For Second Straight Month

India’s consumer price inflation accelerated for a second straight month in August and at a faster-than-expected pace, driven by a rebound in food prices.

The consumer price index rose 3.36 percent year-on-year after a 2.36 percent increase in July, preliminary data from the Central Statistics Office showed Tuesday. Economists had forecast 3.34 percent inflation.

Food prices climbed 1.52 percent following a 0.36 percent fall in the previous month.

On a month-on-month basis, the CPI rose 0.97 percent in August with a 1.30 percent increase in food prices.

Headline inflation is inching closer to the central bank’s medium target of 4 percent, after tumbling to 1.46 percent in June, which was the lowest since the CPI series began in 2012.

Early August, the Reserve Bank of India had slashed key interest rates by 25 basis points to their lowest levels since 2010, as slowing inflation provided room for easing. However, the bank cautioned that price growth could accelerate from the current lows.

The central bank is set to hold its next policy session on October 4.

“Beyond today’s data, inflation looks set to rise further,” Capital Economics economist Shilan Shah said.

The economist pointed out that capacity utilization rates remain relatively tight which in principle should boost core inflation further and excessive liquidity in the banking sector could seep into inflation.

“We don’t think that it will follow up with further loosening at either of its remaining meetings (in October and December) this year,” Shah added.

Separate data from the CSO showed that industrial production grew 1.2 percent year-on-year in July, which was slightly slower than the 1.6 percent growth economists had predicted.

The material has been provided by InstaForex Company –

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