Aug-24 CPI inflation defied expectations of a moderation, with the headline print increasing marginally to 3.65% compared to an upwardly revised 3.60% in Jul-24.
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Aug-24 CPI inflation defied expectations of a moderation, with the headline print increasing marginally to 3.65% compared to an upwardly revised 3.60% in Jul-24. The decline in food price momentum was much lower than anticipated in the month. Nonetheless, Aug-24 registered the first sequential downdraft in food prices in last 7 months amidst improved spatial distribution of rainfall and prospects of harvest for key Kharif crops. This pivot in food price momentum, we believe, is critical at the current juncture. We anticipate a monetary policy pivot in Q3 FY25, with Dec-24 likely to mark the beginning of a shallow rate cutting cycle. Of the possible 75 bps of downward adjustment in policy rates, we expect 50 bps to be delivered in H2 FY25. Oct-24 policy (and the minutes that will be released subsequently) will be closely watched for the stance (likely to change) and views of the three new external members (yet to be announced) who will be joining the MPC.