CPI inflation data for Jan-23 printed 62 bps higher than consensus expectations to 6.52% YoY
Download ReportQuantEco Research || Jan-23 CPI Inflation - Ouch!
Forecasting economic data has been a humbling experience, especially in the post pandemic period. CPI inflation data for Jan-23 printed 62 bps higher than consensus expectations – such a wide margin of underestimation reminds one of the immediate impact on economic data from the first two waves of COVID in 2020 and 2021. Although adverse statistical base effect was partly responsible in pushing CPI inflation higher to 6.52% YoY in Jan-23 (from 5.72% in Dec-22), the near broad-based surge in momentum leaves an unpleasant after taste. We reckon this is going to provide a mild upside risk to our and RBI’s forecast of 6.5% inflation for FY23. Although we maintain our expectation of FY24 CPI inflation at 5.3% on the back of likely disinflation from commodity prices and moderation in domestic growth momentum, elevated and stubborn inflation in case of core and non-perishable food items could keep the hawkish sentiment within the MPC alive for somewhat longer than anticipated.