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Inflation in December likely hit lowest since June 2017 as fuel prices rise at a slower pace: Poll

Inflation likely cooled to 2.20 percent in December - close to the lower end of the Reserve Bank of India’s medium-term target range

Bengaluru: India's December retail inflation is expected to have eased to its lowest since June 2017 as food costs fell and fuel prices rose at a slower pace, a Reuters poll showed, giving the central bank breathing space to keep policy on hold.

Inflation likely cooled to 2.20 percent in December - close to the lower end of the Reserve Bank of India's medium-term target range of 2.0-6.0 percent - according to the 3-9  Jan poll of 41 economists. In November, inflation was at 2.33 percent.

"Food prices fell more in December. Which maybe just a seasonal thing, but I see that as the main factor, a potential downside factor for inflation," said Prakash Sakpal, Asia economist at ING.

If the latest consensus is realised it will mark the fifth month in a row consumer price inflation has held below the mid-point of the RBI's target band.

Forecasts ranged between 1.80 percent and 3.00 percent, and suggested price pressures are easing off from earlier in 2018.

"Inflation has at least in the second half of 2018 surprised on the downside. I think it is common knowledge now that it is mainly driven by food prices," said Radhika Rao, an economist at DBS Bank.

"In fact, the food and beverages component in itself has been in disinflation. December will be the third month running, where prices have actually declined year-on-year."

Cooling inflation expectations have also been driven by lower oil prices and a rupee currency that has managed to stabilise after a steep sell-off.

Crude oil prices are down over 30 percent since 3 October, when it hit the highest in almost four years, and the rupee has bounced nearly 6 percent after touching a lifetime low of 74.48 on 11 October.

According to separate Reuters polls, the rupee is not expected to depreciate sharply from here and oil prices are predicted to rise just modestly this year.

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