SBI Ecowrap - CPI inflation to be below 2%

CPI INFLATION TO BE BELOW 2%

Brief highlights of the report:

As expected consumer price inflation breached the 2.5% mark to come in at 2.18% in May’17. This decline in CPI was primarily due to decline in prices of food and beverages (-0.22% compared to 1.21% in Apr’17). Meanwhile, the core CPI decreased to 4.25% in May’17 compared to 4.53% in Apr’17.

We believe that most inflation risks are now on the downside. In fact a comparison of food prices in the last 3 years indicates that food prices are now lower than the average and prices are not even mean reverting but mean reversing/ lower than the mean. When compared to Oct’16 food prices with the 3 year average, the prices have barely moved. Thus the impact on food prices seems permanent.

Click here for full report

The report has been authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

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