Retail inflation in February likely fell below RBI's 4% target
What's the story
India's consumer inflation for February is expected to drop below the Reserve Bank of India (RBI)'s medium-term target of 4%, a Reuters poll showed.
Notably, this would be the first time in six months that inflation has fallen below this benchmark, mainly due to a slowdown in food price increases.
The drop is attributed to an influx of fresh winter produce into markets over the past few months.
Forecast
Economists predict inflation drop in February
A Reuters poll of 45 economists predicted the annual change in the consumer price index will fall to 3.98% in February from 4.31% in January.
Forecasts ranged from 3.40-4.65%, with nearly 70% of respondents expecting it to be at or below the RBI's medium-term target of 4%.
Only five economists predicted it would surpass January's figure, indicating a consensus on decreasing inflation rates for this month.
Rate cut
Inflation trends impact RBI's interest rate decisions
With inflation comfortably sitting within the RBI's 2-6% target range, economists believe that the central bank could be gearing up for another interest rate cut in April.
This speculation comes after a quarter-point reduction in February.
However, warnings from the India Meteorological Department (IMD) about the possibility of early summer and heatwaves, have raised concerns that inflation could rise again once winter supplies start to run out.
Price trends
Food prices continue to decline
Gaura Sengupta, Chief Economist at IDFC First Bank, observed a continued slowdown in vegetable price increases.
She also pointed out softness in pulse and cereal prices, which are usually the most stable components of food inflation due to their less frequent harvest seasons.
The continued fall in food prices is likely to increase the chances of another rate cut when the RBI's monetary policy committee meets in early April.