Retail inflation expected to rise further: Nomura


New Delhi, Nov 19: Retail inflation is expected to rise further and cross the 4 per cent mark this month. Experts say this will be due to the rise in vegetable and oil prices. The retail inflation touched a seven-month high in October. Stronger food and fuel inflation pushed up headline CPI inflation in October to a 7-month high of 3.58 per cent. According to BofAML, November CPI inflation is likely to be around 4.5 per cent. According to global financial services majors like Nomura, BofAML and Morgan Stanley, price pressures are likely to build further in the coming months following a cyclical recovery in the economy and rise in vegetable and oil prices. “We expect CPI inflation to rise above 4 per cent in November and stay above the RBI’s target of 4 per cent through 2018,” Nomura said in a research note. It however added that government action, like importing onions and containing hoarding, will be far more effective in containing food prices. Retail inflation has been rising consistently since June amid a slowdown in factory output measured on Index of Industrial Production (IIP). According to Morgan Stanley economists, besides the rise in food and oil prices, further implementation of HRA-related hikes by more states and across sectors will also fuel inflationary pressures.
“In the near term, upside risks to inflation could arise due to a further rise in global oil prices, whereas recently announced cut in GST (Goods and Services Tax) rates for most mass consumption items could provide some respite,” the global brokerage firm said in a report.