Aug-23 CPI inflation offered the much-needed relief as it moderated below 7.0%, coming in exactly in line with our expectation at 6.83%YoY
Download ReportQuantEco Research || Aug-23 CPI - Traversing the path of mean reversion
The downside was led by tomato prices within veggies, even though price pressures continued to remain in place for cereals, pulses and spices. Significantly, comfort on core continued to remain intact in Aug-23 print, with core-core inflation holding on to previous month’s level 4.8%. The pace of disinflation is likely to intensify in Sep-23 with headline inflation expected to slip below tolerance threshold of 6.0%, as correction in tomato and some other vegetables gets more pronounced amidst improving supplies, along with ~30 bps impact of LPG price reduction comfort on headline inflation. Despite this, for Q2 FY24, we do see the risk of inflation overshooting RBI’s estimate of 6.2% by 40-50 bps.