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India's August inflation falls below RBI target despite rupee slide

Reuters  |  NEW DELHI 

By Pal

NEW (Reuters) - India's fell below the Reserve of India's medium-term target in August, increasing the likelihood it will keep interest rates on hold in October after raising them at its past two meetings.

Consumer prices rose 3.69 percent from a year earlier, down from July's 4.17 percent, the said on Wednesday.

August was the first month in 10 in which was below the Reserve of India's medium-term target of 4 percent.

The median forecast of economists polled by for August was 3.86 percent, with three-quarters of those polled predicting inflation would be below the RBI's target. Forecasts ranged from 3.55 percent to 5.40 percent.

"While weakness in the rupee adds to the upside risk, factors such as still sanguine domestic and moderation in global commodity prices (excluding oil) are likely to provide some relief," said Garima Kapoor, an at in

Slowing inflation in food prices, which make up nearly half of India's consumer price index (CPI), cancelled out price rises in imported goods stemming from the weakening rupee currency.

slowed to 0.29 percent from a year earlier, against 1.37 percent in July.

Softening inflation could give a boost as he faces next year.

The rupee has fallen more than 12 percent against the dollar this year to hit an all-time low of 72.92 on Wednesday. The tumble has sparked discontent in a country that relies heavily on imports for its fuel needs.

Nationwide protests over record petrol pump prices, partly a result of the rupee slide, disrupted businesses and schools this week.

The RBI, which next meets on Oct. 5, has raised its benchmark rate by a total of 50 basis points at its past two meetings, to 6.5 percent, while warning about inflationary pressures.

Core inflation, which excludes the and fuel sectors, was seen at around 6 percent, easing slightly from 6.3 percent in July, according to analysts.

The International Monetary Fund, in its annual report on released in August, warned that average inflation was likely to rise to 5.2 percent in the 2018/19 fiscal year from a 17-year low of 3.6 percent in the previous fiscal year.

The IMF expects the central to gradually tighten monetary policy in order to tame inflation.

India's annual economic growth surged to a more than two-year high of 8.2 percent in the three months through June.

(Reporting by Pal; Editing by and)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, September 12 2018. 18:10 IST