India’s CPI inflation moderated to 4.25%YoY in May-23 from 4.70% in Apr-23, the lowest level in nearly 25-months.
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India’s CPI inflation moderated to 4.25%YoY in May-23 from 4.70% in Apr-23, the lowest level in nearly 25-months and broadly in line with market expectations (Refinitiv consensus: 4.42%; QuantEco Research: 4.31%). This marked the third consecutive print remaining within RBI’s inflation target band. Over the last three months, headline CPI inflation has eased by a sizeable 219 bps – led predominantly by lower food prices and a favourable base. Having said so, the May-23 print could prove to be a point of “local minimum” in this inflation cycle, with subsequent inflation readings moving somewhat higher (while remaining within the target band) in the range of 4.5-5.5% over the remaining months of FY24. Nevertheless, we acknowledge the possibility of downward adjustment to our FY24 CPI inflation forecast of 5.3% owing to stronger pace of recent disinflationary prints and somewhat moderate commodity prices. For now, we retain our inflation forecast while awaiting clarity with respect to the possible impact of El Nino on the performance of Southwest monsoon.