- Wealth PMS
CPI Inflation for Jan 2015 is out and it’s not a worry. Even though it’s marginally up at +5.37%, the increase is because of the dipping base in the previous year – not really as a major increase looking at the flatness of the index in the chart below (dark blue line):
While element level inflation is lower for everything since August, we do see a rising tide since November. Within control, though:
Remove Food and Fuel and the inflation in the core economy isn’t much. In fact, it’s at its lowest ever, at 3.84%.
This is why inflation is not a worry. When your core inflation is not going up, it’s not a fundamental problem> Of course, the fact that food prices are higher is a potential source of worry, and we are sure that if it were to cross 7% the RBI would consider some corrective action or talk to the government.
The RBI has only just cut rates. So it’s unlikely to cut more just immediately. But as you can see, there’s a lot of room. If inflation remains at this level, we could easily expect further cuts. South Korea suddenly cut rates today. It’s going to be competitive rate cut season if everyone goes out like this. For India, inflation’s not going to be an issue, unless oil prices create a problem.
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