New Delhi: Wholesale price inflation slowed to a 10-month low in January on the back of sliding fuel, manufactured products and some food prices, opening up space for RBI to cut interest rates. The annual rate of inflation, based on the monthly wholesale price index (WPI), was 2.8% in January compared to 3.8% for the previous month and 3% during the corresponding month of the previous year, data released by the commerce and industry ministry showed on Thursday. The easing in WPI comes on the heels of retail inflation slowing to a 19-month low of 2.1% in January, which once again justified the central bank's move to cut interest rates by 25 basis points earlier this month, the first cut after 18 months.
Economists said they expect RBI to cut rates by another 25 basis points in April. "We expect fourth quarter FY19 CPI (consumer price index) inflation to average around 2.4% - lower than RBI's revised estimate and see sub-4% prints in first half of FY20, following an uptrend towards ~4.5% by FY20-end," said Madhavi Arora, economist at Edelweiss Securities.
"Nonetheless, near-term inflation undershoots in conjunction with an assertive change in RBI's tone, adds credence to our call of one more front-loaded 25 basis points cut in April. We do not fully rule out further cut after April," Arora said.