India inflation seen speeding up in Jan but still below target

Roman Schwartz
February 9, 2019

The Reserve Bank of Australia, Bank of Korea and Bank of Thailand have also tempered their outlooks in recent weeks.

The latest Reuters poll of 30 economists surveyed before Thursday's RBI meeting suggested consumer price inflation accelerated to 2.48 percent from a year ago, after slowing in December to its lowest rate since June 2017 at 2.19 percent.

India's central bank unexpectedly lowered interest rates on Thursday in a move that will likely be welcomed by Prime Minister Narendra Modi who wants to boost lending and economic growth as his government gears up for parliamentary elections later this year.

"Headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook", the bank said in a statement.

Carney cautioned that the "fog" of Brexit is increasing the chances of recession, especially if the United Kingdom leaves the United Kingdom with a no-deal Brexit.

"If there's a shock, which... a no-deal transition Brexit would be - it would be a negative shock, then that further increases the possibility of negative quarters".

Das pointed to a sharp slowdown in inflation as justification for the 25-basis-point reduction, taking the repurchase rate to 6.25 per cent.

The greenback is extending gains against the likes of the pound, euro, swissie and loonie and that is resulting in a drop in cable below the 1.2900 handle.

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UNICEF and the United Nations Population Fund warned that the numbers of women and girls suffering from FGM are still very high. "February 6 marks the International Day of Zero Tolerance for Female Genital Mutilation ".

This is being driven by sharp falls in business investment, as well as a drop in consumer spending and signs of a weaker United Kingdom housing market. United Kingdom officials noted the impact of China's slowdown and said trade wasn't contributing as much to growth as they expected.

But it said the hit was expected to be "prove only temporary", with a recovery in expansion later in 2019 - though this is based on a Brexit deal being reached by March 29.

The global economy has continued to slow in recent months, reflecting a tightening in global financial conditions and the impact that trade tensions caused by Brexit and the strained relationship between U.S. and China, the BoE said.

In its accompanying quarterly inflation report, the Bank outlined the volatility of its forecasts depending on the outcome of Brexit negotiations. The economy could grow by around 0.5 percentage point more over the coming three years.

On the flip side, growth could slump to a potential 0.8% in 2019 should uncertainty persist and financial conditions tighten.

Carney denied the February inflation report was a move away from its plan for "gradual and limited" interest rate hikes in the future.

The surprise move came nearly a week after Modi's administration unveiled an expansionary budget, which included US$13 billion of help for consumers ahead of the poll that's due by May, and days after a top adviser to the prime minister said the RBI should cut rates.

India's retail inflation declined from 3.4 per cent in October 2018 to 2.2 per cent in December, well below the bank's target of four percent.

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