India inflation falls below RBI target as high rates nip demand

INDIA’S retail inflation fell below the central bank’s target ceiling for the first time in three months as a series of interest rate increases since last year has slowed demand in Asia’s third largest economy.

The consumer price index rose 5.66% from a year earlier, according to data released by the Statistics Ministry on Wednesday (Apr 12), coming below the central bank’s target ceiling of 6%. The print was slower than the median forecast for a 5.70% gain in a Bloomberg survey of economists and compares with a 6.44% rise in February.

The latest print reinforces a move by the Reserve Bank of India (RBI) to keep its policy unchanged in order to assess the cumulative impact of 250 basis points in total rate increases since May last year. It could also lay the ground for future cuts in the rates given the International Monetary Fund is now guiding for ultra-low rates in the US and other industrial countries.

Easing prices will help India’s central bank support the economy that’s showing signs of cooling, prompting economists to forecast interest rate cuts later in the year. A forecast of a normal monsoon by the weather office will also provide reprieve to India’s policymakers. BLOOMBERG