By Pranoy Krishna
BENGALURU -India's consumer inflation rate likely eased back below the lower end of the RBI's 2-6% target range to 1.70% last month on persistent cooling in food prices, according to economists polled by Reuters.
Food prices, which account for nearly half of the consumer price index, have dropped sharply in recent months from last year's high levels driven by a sustained slide in vegetable costs, which have fallen by double digits since April.
Just last week the Reserve Bank of India
signaled that a benign inflation backdrop provided scope for further policy easing to support growth, even as it held rates steady as expected.
Price pressures have stayed below the RBI's medium-term target of 4% for seven straight months.
While economists had expected the base effects that largely helped keep a lid on inflation this year to fade in August, the official data showed food prices remained constrained compared with a year earlier - a trend that was likely sustained in September.
The October 6-9 Reuters poll of 38 economists forecast that inflation as measured by the annual change in the consumer price index fell to 1.70% in September from 2.07% in August.
Forecasts for the data due out next Monday ranged from 1.20% to 3.30%.
"I expect food inflation to come in negative again... Prices of vegetables, pulses, and eggs have all declined in September," said Dhiraj Nim, economist at ANZ.
"Even if you account for the base effects...the month-on-month momentum in inflation, especially in the food items, has been particularly weak so that is of course a bit of a surprise. We had not expected this weak momentum."
The RBI expects inflation in the current financial year to average 2.6%, lower than its previous estimate of 3.1%. That was also lower than the 2.8% predicted in a Reuters poll conducted last month.
Core inflation, which excludes volatile food and fuel components and better reflects underlying demand, is expected to have edged up slightly to 4.15% in September from an estimated 4.10% in August.
The Indian statistics office does not publish official core inflation data.
That was partly driven by a rally in gold prices, which touched new record highs during the last month as global investors sought safer assets away from the U.S. dollar.
Wholesale price index-based inflation likely edged down slightly to an annual 0.50% last month from 0.52% in August, the survey showed.
(Reporting by Pranoy Krishna; Polling by Vijayalakshmi Srinivasan; Editing by Hari Kishan and Hugh Lawson)
