December inflation seen up slightly, rate cut still expected
India's headline inflation is likely to have risen in December by less than the central bank projected, and should reinforce hopes for a cut in interest rates this month to boost an economy that is set to post its slowest growth in a decade.
Data to be released later on Monday is expected to show the wholesale price index (WPI), India's main inflation gauge, probably rose an annual 7.4 percent in December, according to a Reuters poll, reversing a declining trend and faster than the 7.24 percent seen in November.
However, the Reserve Bank of India had projected December inflation of around 8 percent in its October policy review, when it had also raised its March-end inflation projection by 50 basis points to 7.5 percent.
While food prices are keeping the headline inflation figure high, non-food manufacturing, or core inflation, has been falling and dropped to 4.5 percent in November.
"If core inflation remains below 5 percent, it increases the chance of the central bank cutting rates by 25 basis point in January," said Rahul Bajoria, economist at Barclays Capital in Singapore.The RBI's next policy review is on Jan. 29, and analysts expect a cut of at least 25 basis points in the policy repo rate , which has been held at 8.0 percent for past the nine months despite a sharp slowdown in the economy.
Upward revisions in earlier provisional numbers could limit the extent of rate cuts by the RBI. The September WPI figure was adjusted up by 26 basis points to
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