The use of monthly CPI data for now more than 14-15 months with Y-o-Y inflation comparisons available for 2 months on the trot, it may now be a matter of time before the WPI data becomes secodnary in the Indian scheme. Consumer point inflation though has been refashioned and some may want to verify it further and the WPI trends at sub series level across Core, Primary and Fuel as well are available for estimation quite discreetly and forecasts may not get market confidence for some more time.
The Core inflation is expected to be the biggest encouraging figure in the May data at 4.7% almost half of the data till no in the past one year, which encourage bonds to move down to below 8% in anticipation of a positive RBI Monday. Fuel inflation though likely to go back to near 13% is s till belo the 2011 benchmark of 14.5% and the Primary Articles data of 12% is actually understandable and does not require more policy action as commodities trend down steeply in many cases despite China’s buying having begun in earnest in May
The rate cuts may be 50 bp as pointed out by current 20Y yield movement but then RBI will be not expected to do more than 150 basis points in the whole year and a 50 bp cut removes the flexibiliity from its hands having committed then 100 bp before JAS and OND quarters even begin and that likely means the markets will prepare for a slow(25bp) of fast ( 0 bp) descent on Monday
The inflation data is a little late but safely bullish for the RBI Policy day at 7.55% Primary inflation at 10.88% was still less than 11% and fuel inflation did not get most of the fuel rise in the last week at 11.53%. The Core inflation was below 5% at 4.99% primary and Fuel inflation ere at 9.71% and11% in April 2012
- India Inflation Reports (May 2012) : Last series for WPI data? (awardz.wordpress.com)
- India inflation logs in for the India party (awardz.wordpress.com)
- Inflation rises to 7.23 per cent in April (thehindu.com)