CPI inflation expected to be at 4.3% in Q4 of FY19

Professional forecasters surveyed by the Reserve Bank of India in March 2018 expect consumer price index (CPI) inflation to firm up to 5.1 per cent in the first quarter (Q1) of 2018-19, and moderate thereafter to 4.3 per cent in the fourth quarter (Q4) of 2018-19. 

Their medium-term inflation expectations remained unchanged at 4.5 per cent, while longer-term inflation expectations increased by 40 basis points to 4.5 per cent. 

“Taking into account the initial conditions, signals from the forward-looking surveys, and estimates from structural and other models, CPI inflation is projected to pick up from 4.4 per cent in February 2018 to 5.1 per cent in Q1 of 2018-19 due to unfavourable base effects and then moderate to 4.7 per cent in second quarter, and 4.4 per cent in third quarter and Q4, with risks tilted to the upside,” the monetary policy report said.

The direct impact of the increase in the house rent allowance announced by the government fades away by December 2018, it said.