India's headline inflation probably fell sharply to 7.50 percent year-on-year in December from 9.11 percent in the previous month, helped by easing food prices, a Reuters poll showed.
Forecasts from a poll of 27 economists ranged from 7.00 percent to 8.60 percent. Only three of the 27 economists polled expect inflation to stay at or above 8 percent.
The wholesale price index has been stuck above 9 percent for a year and 13 interest rate increases by the Reserve Bank of India (RBI) since March 2010 had failed until recently to arrest its rise.
However, annual food prices fell 3.36 percent in the week to Dec. 24, the first decline in nearly six years, on improved supply of pulses and vegetables.
"We expect a moderation in inflation on account of substantial easing of food prices and high statistical base," said Rupa Rege Nitsure, chief economist at Bank of Baroda.
"However, we perceive manufactured product price inflation to have remained firm in December on account of costlier imports and inelastic demand," she said.
The Indian rupee fell 16 percent in 2011, increasing the cost of imported goods, which puts upward pressure on inflation.
The RBI is expected to cut interest rates this year, according to the latest Reuters poll taken before the December policy review, bringing the repo rate down to 8 percent by the end of the year from 8.50 percent now.
FACTORS TO WATCH
Annual fuel price index eased to 14.60 percent in Dec. 24 week from a rise of 15.24 percent in Dec. 3 week.
Primary articles price index was up 0.10 percent in the year to Dec. 24 as compared to 2.70 percent a week before.
India's industrial production is expected to rise 2.2 percent in November, according to a Reuters poll.
MARKET IMPACT Bond and overnight indexed swaps ( OIS) markets are factoring in a 7.40 percent to 7.50 percent inflation number for December.
If the inflation figure is around 7.30 percent, the 10-year benchmark government bond yield could fall to 8.10 percent, while the 1-year swap rate could soften by 20 basis points and the 5-year swap rate could decline by 10 basis points.
Dealers said if the inflation number is above 7.60 percent, the 10-year bond yield is likely to rise to 8.35-8.40 percent, while the 1-year swap rate could climb 10 basis points.
(Source- http://economictimes.indiatimes.com)
Forecasts from a poll of 27 economists ranged from 7.00 percent to 8.60 percent. Only three of the 27 economists polled expect inflation to stay at or above 8 percent.
The wholesale price index has been stuck above 9 percent for a year and 13 interest rate increases by the Reserve Bank of India (RBI) since March 2010 had failed until recently to arrest its rise.
However, annual food prices fell 3.36 percent in the week to Dec. 24, the first decline in nearly six years, on improved supply of pulses and vegetables.
"We expect a moderation in inflation on account of substantial easing of food prices and high statistical base," said Rupa Rege Nitsure, chief economist at Bank of Baroda.
"However, we perceive manufactured product price inflation to have remained firm in December on account of costlier imports and inelastic demand," she said.
The Indian rupee fell 16 percent in 2011, increasing the cost of imported goods, which puts upward pressure on inflation.
The RBI is expected to cut interest rates this year, according to the latest Reuters poll taken before the December policy review, bringing the repo rate down to 8 percent by the end of the year from 8.50 percent now.
FACTORS TO WATCH
Annual fuel price index eased to 14.60 percent in Dec. 24 week from a rise of 15.24 percent in Dec. 3 week.
Primary articles price index was up 0.10 percent in the year to Dec. 24 as compared to 2.70 percent a week before.
India's industrial production is expected to rise 2.2 percent in November, according to a Reuters poll.
MARKET IMPACT Bond and overnight indexed swaps ( OIS) markets are factoring in a 7.40 percent to 7.50 percent inflation number for December.
If the inflation figure is around 7.30 percent, the 10-year benchmark government bond yield could fall to 8.10 percent, while the 1-year swap rate could soften by 20 basis points and the 5-year swap rate could decline by 10 basis points.
Dealers said if the inflation number is above 7.60 percent, the 10-year bond yield is likely to rise to 8.35-8.40 percent, while the 1-year swap rate could climb 10 basis points.
(Source- http://economictimes.indiatimes.com)
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