New Delhi - India’s inflation eased and factory output slowed, boosting the odds that central bank governor Raghuram Rajan will cut interest rates for a third time this year.
Consumer prices rose 4.87 percent last month from a year earlier after a revised 5.25 percent increase in March, the statistics ministry said yesterday. The median of 36 estimates in a Bloomberg survey of economists had predicted a 4.9 percent gain.
Industrial production grew 2.1 percent compared with an estimated 3 percent rise.
Rajan refrained from lowering borrowing costs at a scheduled review last month and said the next move would depend on data showing the balance of risks to inflation. A rebound in oil prices and a drop in the rupee had raised concern about whether the Reserve Bank of India will meet its target of keeping price pressures within 6 percent.
“This allays some of the concerns that had built up around the space for further monetary easing,” said Jyotinder Kaur, an economist at HDFC Bank in Gurgaon, near New Delhi.
She predicts Rajan will cut the benchmark repurchase rate by a quarter percentage point when he reviews policy at the start of next month.
While India’s inflation has slowed from an average of 6.7 percent last year, it is still among Asia’s fastest. The yield on the 10-year sovereign bond jumped 13 basis points last month, the most since September 2013, as a 21 percent rally in Brent crude and the weather department’s forecast of below-normal monsoon rains reignited concern about inflation.
Rajan said in February that 1.5 to 2 percentage points was a reasonable inflation-adjusted rate for India. According to the monetary authority’s forecasting model, consumer price gains will moderate to 4 percent by August.
Bloomberg