Economists revise FY25 CPI inflation estimates to 4.7-5 per cent
According to 10 economists, CPI inflation in FY25 may average 4.7-5%, higher than the RBI’s 4.5% forecast. This reduces the likelihood of rate cuts in December and February, which analysts had previously expected.
Radhika Piplani, chief economist at DAM Capital, expects the RBI to start gradual rate cuts next year, prioritizing inflation control. She gives a 60% chance of a rate cut in February 2025 due to growth slowdown.
“But, the growth momentum is ebbing, which may nudge RBI to consider the first cut in February,” she said.
“For full year FY25, GDP estimate is expected to be 6.6% (v/s RBI’s estimate of 7.2%). Therefore, the rate cut cycle is expected to start from February onwards, provided food inflation risks subside.”
Data released on Tuesday showed, retail inflation rising to a 14-month high of 6.21% in October from 5.49% in September, due to a sharp rise in prices of key food items, such as vegetables–mainly tomatoes–and edible oils. Core CPI too, which excludes items of food and fuel, climbed to a 10-month high of 3.7% from 3.5% in September.
Food Inflation Hits 15-Month High; Experts Expect Moderation Ahead
During the month, food inflation surged to a 15-month high of 10.87%, driven by a sharp jump in inflation rates of vegetables (42.18% from 35.99% in September) and oils and fats (9.51% from 2.51% in September).
Tomato inflation in October skyrocketed to 161.27% (vs 42.9% September), due to disruption in its supply caused by rainfall in key producing states, such as Karnataka and Maharashtra. But in November, prices have moderated on account of arrival of fresh supplies from Madhya Pradesh and Himachal Pradesh. In the coming months, vegetable inflation is likely to moderate on account of a favourable base effect and the onset of winter, say analysts.
However, edible oil prices are unlikely to cool down anytime soon, given India’s import dependence on the commodity.
ICICI Bank in a report said: “Given the revised trajectory of food inflation seen by us, we now expect Q3 headline inflation at 5.5% (5.1% earlier) and Q4 at 4.1% (4% earlier).” For FY25, the bank expects inflation to average 4.7%.
