16 Feb 2015
India’s WPI falls to negative territory, rate cut expectations rise – TDS
FXStreet (Barcelona) - The TD Securities Team reviews India’s WPI print, noting that the weakest readings in 30+ years at -0.39% yoy has led to an increase in rate cut expectations from the RBI.
Key Quotes
“The Wholesale Price Index (WPI), which the RBI used as its inflation benchmark until last year, fell to -0.39% Y/Y in January from +0.11% in February (cons: +0.11%). This is one of the weakest readings in more than 30 years, with similarly weak prints only recorded for two consecutive months in June and July 2009.”
“Numerous categories have contributed to the sharp decline in WPI, but the -7.8% Y/Y contraction in ‘fuel and power’ certainly stands out as the result of depressed international oil prices.”
“Overall, primary articles exhibited a rebound to 3.3% Y/Y from 2.2% led by accelerating ‘food articles,’ but ‘non-food articles’ and ‘minerals’ continued to contract in January.”
“The WPI surprise follows the slower than expected CPI on February 12 (5.1% Y/Y in January vs cons: 5.5% and prior: 4.7%), which continues to pose downside risks to the RBI’s future inflation projections.”
“As a consequence, we think the combined CPI and WPI print will increase the odds of another rate cut from the RBI even potentially earlier than the next scheduled meeting on April 7.”
Key Quotes
“The Wholesale Price Index (WPI), which the RBI used as its inflation benchmark until last year, fell to -0.39% Y/Y in January from +0.11% in February (cons: +0.11%). This is one of the weakest readings in more than 30 years, with similarly weak prints only recorded for two consecutive months in June and July 2009.”
“Numerous categories have contributed to the sharp decline in WPI, but the -7.8% Y/Y contraction in ‘fuel and power’ certainly stands out as the result of depressed international oil prices.”
“Overall, primary articles exhibited a rebound to 3.3% Y/Y from 2.2% led by accelerating ‘food articles,’ but ‘non-food articles’ and ‘minerals’ continued to contract in January.”
“The WPI surprise follows the slower than expected CPI on February 12 (5.1% Y/Y in January vs cons: 5.5% and prior: 4.7%), which continues to pose downside risks to the RBI’s future inflation projections.”
“As a consequence, we think the combined CPI and WPI print will increase the odds of another rate cut from the RBI even potentially earlier than the next scheduled meeting on April 7.”