December CPI likely to reach 5.1 per cent

India’s retail inflation is expected to touch 17-month high, showed a poll conducted by the leading international news agency.

The CPI and IIP data for the month of December is scheduled on Friday, January 12, 2018. If the forecast comes out to be true, then this could lead to tightening of the monetary policy by the Reserve Bank of India.

From 4.88 per cent consumer price index in November, December inflation is estimated to surge by 22bp to 5.1 per cent, which would be highest since July 2016, said the poll. Additionally, the wholesale price index is expected to rise slightly from 3.93 per cent in November to 4.00 per cent in December.

Factors that may influence the December Consumer price index are increased prices for some food items and the effect of higher pay for government employees. Further, increase in allowances of government employee is expected to put pressure on consumer inflation.

For the six months through March, the RBI slightly raised its inflation projection above its 4 per cent medium-term target to 4.3 to 4.7 per cent.

With this uptrend in retail inflation, we believe that RBI would tighten the monetary policy and there would not be any further rate cuts. Industry analysts believe that here onwards market may have to witness a rate hike, if the inflation maintains its upward trend.