Views on CPI - Oct 12, 2020 - Acuité Ratings & Research

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

"The CPI print for Sep 2020 comes as a bit of surprise with overall CPI and CPFI having shot up further to 7.3% and 10.7% respectively. This is contrary to the market expectations that with the unlocking of the economy and the easing of the supply constraints, the food prices will moderate over the next few months. Clearly, the supply constraints continue to exist despite a favourable monsoon and good agricultural production as reflected in the higher double digit inflation in not only protein items but also vegetables and spices. Our concerns on the threat of stagflation appear to be getting stronger and while the RBI has communicated its decision on continuing with an accommodative environment well into next fiscal, such increasing levels of inflation will clearly be a concern for the policy makers. In our opinion, management of bond yields may prove to be seriously challenging in such an inflationary and fiscal environment."

Source : Equity Bulls

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