Should investors be prepared for February’s bad CPI inflation print?

Now, since petrol and diesel prices have not been hiked yet, the impact of the steep hike in international oil prices will not be reflected in the February data, which is due on March 14.

Economists at Nirmal Bang Institutional Equities expect CPI inflation to be 5.92% in February, marginally lower than 6.0% in January on a higher basis. Core CPI is expected to remain stable at 5.95% over January. “The pressure on core inflation is likely to moderate to some extent alternatively as petrol and diesel prices remain stable despite sharp rise in crude oil prices,” the domestic brokerage house said in a report.

But the good news ends here. Inflation readings for the coming months may turn bad and even break the Reserve Bank of India’s (RBI) comfort level if crude oil prices continue to rise. Therefore, some economists have raised their inflation forecasts for the year further.

“On the assumption that oil companies raise local fuel prices after local elections are over, we expect headline inflation to be around 0.3% points higher this year,” analysts at Capital Economics Ltd said in a report on March 4. “Overall, we now forecast inflation to reach 6.5% this year (previously 6.2%),” the report said.

Meanwhile, in the US, CPI inflation rose to 7.9%, a new high from 7.5% in January, on the back of higher gasoline and food prices.

“We see increasing risks to US headline inflation in the coming months, even with a favorable base. We see the Fed raising rates by 25 basis points (bps) in March And there’s still a fair chance of five hikes this year.” Madhavi Arora, Principal Economist, Emkay Global Financial Services, said. One basis point is one hundredth of a percentile. The two-day meeting of the US Federal Reserve ends on March 15.