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Pricey Haircuts Seen Messing Up Indias Retail Inflation Outlook

  • December 18, 2020
    Pricey Haircuts Seen Messing Up Indias Retail Inflation Outlook

    Rising
    cost of services offered by hair stylists to security guards are a new
    challenge for Indias monetary policy makers, who stand ready to resume
    interest-rate cuts as soon as the food-price driven spike in inflation
    wears off.To get more news about WikiFX, you can visit wikifx official website.

      Services inflation surged to 4.8% in September from a year ago,
    compared with 4.4% in February before the coronavirus outbreak,
    according to estimates by Citigroup Inc. The pickup reflects cost-push
    factors associated with the pandemic, such as social distancing and
    screening of customers, as well as fewer workers in urban centers after
    migrating back home during the nationwide lockdown.
      “While the
    increase is not much, directional movement is rather counter intuitive
    since services inflation is mostly synchronous to the demand cycle,”
    Samiran Chakraborty, chief India economist at Citi, wrote in a report
    last week.
      That complicates the central banks inflation outlook,
    which forecasts overall consumer-price growth to slow to 5.4% in the
    three months to December from about 7% last quarter. While the estimate
    relies largely on food prices coming off the boil and supply chains
    being restored, latest trends show vegetable prices remained stubbornly
    high and supply lines are yet to be mended.
      A spike in inflation
    was the main reason for the central bank to halt its policy easing after
    delivering 115 basis points of rate cuts this year. The Monetary Policy
    Committee, however, decided to look through the current inflation hump
    as transient and retained an accommodative stance this month to support
    an economy headed for its worst annual contraction.
      “Unprecedented
    inflation fee” is how Sanjiv Mehta, the chairman and managing director
    of the local unit of Unilever Plc, described the commodities cost for
    the personal-care products and processed-food maker. “We believe the
    inflation in select categories is likely to continue in the near-term,”
    he said Tuesday.
      Clues for whether sticky price pressures could
    keep policy makers on pause for longer will be available when the
    minutes of the MPCs latest meeting are published Friday. Three of the
    six-member rate panel were appointed this month and are seen by many
    economists as more dovish than the previous members.
      “The current
    growth-inflation assessment seems to suggest that the MPC would like to
    stay on a long pause,” Citis Chakraborty wrote. “Sluggish growth
    momentum would force the MPC to keep rates low while fear of inflation
    might not let them cut any further.”