(Bloomberg) -- India’s inflation unexpectedly accelerated in August, giving the central bank reason to stay on hold even though it remained below its 4% target for the second straight month.
The consumer price index rose 3.65% last month from a year earlier, data from Statistics Ministry showed Thursday, up from 3.54% in July and above the 3.47% median forecast in a Bloomberg survey of economists.
The Reserve Bank of India has left its benchmark interest rate unchanged for more than 18 months now, with Governor Shaktikanta Das reluctant to ease policy until inflation settles around the central bank’s aim. The next rate review is due on Oct. 9.
While inflation was below the target in July and August mainly due to statistical reasons, the RBI expects it to rebound again in September. In a separate Bloomberg survey, economists expect price gains to average at 4% in the July-September quarter, indicating an inflation level closer to 5% in data published next month.
Food prices, which make up about half of the consumer price basket, rose 5.66%, compared with 5.42% in July. Core inflation, which excludes volatile food and fuel costs, climbed to 3.44% in August from a year earlier, compared with 3.41% in July, according to calculations from Bloomberg Economics.
“The slight uptick in August inflation was largely led by surprise on the food prices, while core inflation remained steady,” said Upasna Bhardwaj, chief economist of Kotak Mahindra Bank Ltd. The reading indicated that the RBI will still remain “focused on inflation over the next few months,” but there’s a high probability of a change in the policy stance to ‘neutral’ in the October policy, she said.
India’s economy grew at the slowest pace in five quarters in the April to June period and there are concerns that the central bank’s tight monetary policy may have hurt economic growth.
Other highlights from the CPI data:
- Housing prices rose 2.66% from a year earlier, compared to a 2.68% rise in July
- Clothing and footwear costs rose 2.72% in August from a year earlier, compared to 2.67% in July
- Data released separately showed industrial production grew 4.8% in July, compared to 4.6% in the previous month
(Updates with more details and a chart)
©2024 Bloomberg L.P.
