CPI inflation to moderate to around 4% in Nov: Nomura

A moderation in aggregate food prices will lower inflation momentum in November and the CPI inflation is expected to moderate to around 4 per cent in November from 4.2 per cent in October, says a Nomura report.
According to Japanese financial services major, demonetisation is disinflationary in the medium term, but more neutral in the near term.
"We currently expect CPI inflation to moderate to around 4.0 per cent y-o-y in November from 4.2 per cent in October," Nomura said in a research note.
To see how demonetisation has affected inflation, Nomura looked at high-frequency price data for both perishable and non-perishable food items, which together account for around 25 per cent of the CPI basket.

"Data since the November 8 demonetisation move shows a divergence between perishable and non-perishable food prices. Perishable prices have moderated by 3.3 per cent, led by lower fruit and vegetable and egg prices, while non-perishable prices are 1.1% higher, led by wheat," the report said.
It further added that on aggregate, though, food prices are marginally lower.
The immediate effect of the demonetisation-induced cash shortage has been to curtail transportation and severely limit the ability of middlemen to buy any significant stock, forcing farmers to sell perishable goods at lower prices.
"Hence, as the cash shortage eases over time, we expect perishables prices to recover in January-March quarter of 2017 (after adjusting for seasonality)," the report added.