Headline CPI came in at 3-month high of 4.9% YoY in Nov'21, much lower than our expectation of 5.3% and the Bloomberg consensus of 5.1%. It means CPI-inflation averaged 5.2% in Apr-Nov'21, following 6.9% inflation in Apr-Nov'20, stated Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services.
Lower than expected inflation was entirely because of 'vegetables' and thus, food inflation. As against our expectation of 2.9% food inflation, it came in at 1.9%, pulling the headline inflation, he said.
Core inflation, however, was 6.2% last month, slightly higher than our expectation of 6.1% and same as in Oct'21. CPI excluding vegetables was 6.7%, similar to what it has been in the previous five months.
"Overall, while the headline inflation was lower than expected, it doesn't change anything materially. We expect it to touch 6% by Jan'22. Core inflation though is likely to stay at 6%," opined Nikhil Gupta.
Accordingly, the explicit normalization of the monetary policy will likely begin in Feb'22, with a 15bps hike in reverse repo rate, he added.
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