Economic Data Fixed Income Date

Analysis of CPI Feb 2023 Inflation eased mildly: 14 March 2023

Core still remain sticky

 CPI eased to 6.4% YoY in February (+0.2% MoM) from 6.5% YoY in January (+0.5% MoM) led by modest
decline in food prices.
 Nevertheless, two successive 6% plus headline inflation print is unlikely to provide comfort to the RBI.
 RBI’s focus lately has shifted on core inflation, and this metric continues to remain sticky at 6.1% with
internals like housing rentals, household goods and services, education and health maintaining strong
growth on MoM basis.
 With domestic inflation above the 6% handle, we see the RBI to hike by 25 bps in April 2023.
 Domestic data prints alongside Fed’s actions considering the recent US banking sector woes will likely
determine the course of future hikes.

Feb. 2023 (Prov.) Jan. 2023 (Final) Feb. 2022

(%)
Rural Urban Combine Rural Urban Combine Rural Urban Combine
CPI
6.72 6.10 6.44 6.85 6.00 6.52 6.38 5.75 6.07
Inflation (General)
CFPI 6.60 5.09 5.95 6.65 4.85 6.00 5.81 5.76 5.85

Description Weights MoM YOY

Egg 0.43 -5.71% 4.32%
Vegetables 6.04 -2.53% -11.61%
Oils and fats 3.56 -1.71% -0.49%
Meat and fish 3.61 -1.57% 3.39%
Sugar and Confectionery 1.36 -0.58% 1.26%
Pulses and products 2.38 -0.29% 4.09%
Non-alcoholic beverages 1.26 0.29% 4.37%
Prepared meals, snacks, sweets etc. 5.55 0.52% 7.98%
Spices 2.5 0.53% 20.20%
Cereals and products 9.67 0.75% 16.73%
Milk and products 6.61 0.92% 9.65%
Fruits 2.89 3.28% 6.38%
Food and beverages 45.86 -0.06% 6.26%
Pan, tobacco and intoxicants 2.38 0.40% 3.22%
Clothing 5.58 0.38% 8.67%
Footwear 0.95 0.39% 9.79%
Clothing and footwear 6.53 0.38% 8.79%
Housing 10.07 0.81% 4.83%
Fuel and light 6.84 0.05% 9.90%
Transport and communication 8.59 0.18% 4.46%
Education 4.46 0.23% 5.62%
Recreation and amusement 1.68 0.24% 4.81%
Household goods and services 3.8 0.46% 7.35%
Health 5.89 0.60% 6.50%
Personal care and effects 3.89 0.73% 9.43%
Miscellaneous 28.32 0.41% 6.12%
General Index (All Groups) 100 0.17% 6.44%
1
Economic Data
Analysis of CPI Feb 2023
14 March 2023
Analysis of CPI Feb 2023

 This clearly indicates that the expected dis-inflation expected after the 250bps hike in the repo rate by the
RBI has yet not taken shape. Given that retail inflation remains higher than the threshold 6% for the last
two months, it might not be possible for RBI to pause immediately.
 The RBI governor had indicated during the last meeting that the real rates are still lower than the pre-
pandemic levels, which might result 25bps increase in the repo rate in April.
 Recent developments in the US banking system is unlikely to lead to any snowballing effect on the global
financial and banking systems.
 US CPI print tomorrow along with the US Fed’s rate actions on 22 March, 2023 (and any further
developments for the US banking system) will also be critical inputs for the RBI.

CPI Trend-

CPI Trend
9.00%
7.79%
8.00% 7.41%
6.95% 7.04% 7.01% 7.00%
7.00% 6.71% 6.77%
6.52% 6.44%
6.01% 6.07% 5.88% 5.72%
6.00% 5.59%
4.91%
5.00%
4.35% 4.48%
4.00%

3.00%

2.00%

1.00%

0.00%

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Economic Data
Analysis of CPI Feb 2023