Retail inflation expected to dip to three-month low of 5.09% in January

Economists surveyed by Reuters anticipate a decline in retail inflation to a three-month low of 5.09 per cent in January, driven by easing food prices and favorable base effects. The poll also suggests a moderation in core inflation to 3.70 per cent.

The Reserve Bank of India, maintaining its repo rate at 6.50 per cent for the sixth consecutive meeting on February 8, has underscored "large and repetitive food price shocks" as a significant risk to the ongoing disinflation trend.

Following a surge since November, food prices, which constitute about half of the consumer price index (CPI) basket, showed signs of easing last month, according to economists in the Reuters poll conducted from February 5-8.

The survey of 44 economists forecasts headline inflation, measured by the annual change in the CPI, to decrease to 5.09 per cent in January from 5.69 per cent in December. However, this would still surpass the central bank's medium-term target of 2 per cent-6 per cent.

Core inflation, excluding volatile food and energy prices, is anticipated to decline further from December's four-year low of 3.80 per cent to 3.70 per cent in January, according to the median forecast of 22 economists. It's worth noting that the Indian government does not release core inflation figures.

Suman Chowdhury, Chief Economist at Acuite Ratings and Research, commented, "Core inflation has come down to a comfort zone below 4 per cent, and we believe it is likely to be stable in the near term despite pressures on food inflation, if any."

Despite these trends, the RBI is expected to maintain its key policy rate unchanged until at least the end of June, with potential cuts of 25 basis points in each of the third and fourth quarters. This forecast suggests a relatively modest move compared to expectations for easing cycles by other global central banks.

(With Reuters inputs)