Expert views - Consumer inflation eases to 3.66 pct in Aug

MUMBAI (Reuters) - India's annual consumer price inflation eased to 3.66 percent in August, government data showed on Monday, almost in line with 3.6 percent forecast by analysts in a Reuters poll.

July's print was downwardly revised to 3.69 percent from 3.78 percent earlier.

COMMENTARY

RUPA REGE NISTURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS

"The inflation number showed that food prices, which generally creates seasonal uncertainty, has been well controlled, so there is no threat to inflation expectations.

"That opens up space for RBI to ease rates, but it may not have much impact on the real sector through the credit channels as a large number of banks are unable to cut rates due to huge, stressed assets.

"While any U.S. Fed rate hike will create short-term volatility, in my view RBI will give preference to CPI number than Fed because rate cut will augur well for long-term investment sentiment."

A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD

"Inflation is in line with our estimate. Despite vegetable and pulses inflation being a bit higher, overall inflation is benign.

"Inflation trajectory will be lower than RBI's estimate. We expect the average inflation at 5.5 percent versus RBI's 5.8 percent estimate by January 2016. So we expect RBI to cut the repo rate by 25 basis points in September.

"The risk to this call is if there is severe market volatility if the US Fed hikes their interest rate this week."

MADHAVI ARORA, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"Definitely it's a surprise on the upside, the vegetable inflation is the biggest surprise for us. It has come out higher than what data was implying.

"I think the overall food inflation remains benign due to base effect. Otherwise if you look at service inflation that has stayed pretty much close to 5 percent, so that way it seems that except for certain categories, the miscellaneous component seems to be relatively resilient.

"Food I think will be a worry in coming months because whatever base effect that was supporting the CPI number will fade in coming months, and I think vegetable inflation on a sequential basis will be something to look out for given that we are already seeing more of a drought-like situation now.

"It's too early to say if it will sustain in the coming months, but it's a big risk for CPI at this stage. That being said, we are still looking for a rate cut by the Reserve Bank of India.

"Despite the number being a bit of a surprise we will still see a rate cut in the coming policy, because if the Fed doesn't move this time round it will be an opportune time for the RBI to move in the September policy.

INDRANIL PAN, GROUP CHIEF ECONOMIST, IDFC LTD

"Inflation has come higher than street expectation and this is the last month of favourable base effect on inflation.

"Inflation is expected to inch up from next month and there is no comfort from vegetable prices. Also, we expect the Fed to not hike rates in September, which means if RBI cuts rates this month then it may aggravate the capital outflow situation."

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES

"The bigger thing is that soft inflation, and to some extent a deflationary trend, is continuing. We expect this continue. We expect a rate cut, if not immediately, by the month-end policy meet."

(Reporting by Suvashree Dey Choudhury, Karen Rebelo, and Himank Sharma; Compiled by Rafael Nam)