WPI likely to fall to 3.5% in September: Credit Suisse

Wholesale Price Index-based inflation is likely to slide to as much as 3.5% in September, says financial services firm Credit Suisse.

The country's WPI inflation fell to 4.7% in May, its lowest rate since October 2009.

According to its report, the lagged effects of weak manufacturing activity, softer money and lending growth and the fall in rupee denominated commodity price inflation are yet to be fully felt.

"With this in mind, we are looking for the WPI rate to fall below 4% in August and bottom at around 3.5% in September," Credit Suisse said.

From September onwards, however, a combination of tough base effects and the impact of the rupee depreciation will lead to a rise in WPI (Wholesale Price Index).

In 2013/14, Credit Suisse expects inflation to average 4.8% which compares with a June consensus projection of 5.7%.

"A good start to monsoon and a favourable forecast bodes well for a good harvest and a lower price rise. In our view, consumer price inflation will trend lower throughout the rest of the fiscal year ending in March 2014," Credit Suisse said.

Though the consumer price inflation is currently hovering near the double digit levels (9.3% in May), it is expected to fall to more acceptable levels in the coming months on the back of a good rabi crop and favourable monsoon, the report said.

On interest rates, Credit Suisse said: "The central bank will deliver another couple of 25 bps repo rate cuts," adding, it has pencilled in the July 30 meeting and the mid-September meet as the timing of the reductions.