Headline inflation for Feb likely to be below 8 per cent: Experts

The government will release the headline inflation numbers for February tomorrow. In January, inflation was at 8.23 per cent.

"We expect February headline inflation to soften to sub-8 per cent levels, we see the main relief coming from sharp fall in food prices," Barclays Capital said in a research note.
The overall inflation has remained above 8 per cent since February 2010. The government expects it to fall to 7 per cent by March end.

Barclays said the core (non-food manufacturing) inflation would be around 5 per cent in February.

IIFL Economist Ashutosh Datar said, "We expect inflation (for February) to moderate from over 8 per cent now, but do not foresee it falling to sub 7 per cent in the next couple of months, given the strong underlying inflationary pressures in the economy," he said.
Crisil chief economist D K Joshi, however, sees headline inflation coming down to 7 per cent range in the coming months. "Food inflation is falling, so, I think the overall inflation too should be in the range of 7 per cent by the fiscal end."

Experts said that despite likely moderation in inflation, RBI would continue its monetary tightening measures in its March 17 mid-quarterly review.

Barclays said the elevated headline and sticky core inflation prints, amid continued weakness in industrial production, would complicate RBI's policy moves.

The Reserve Bank has hiked policy rates seven times since March 2010 to tame inflation, which has remained over its comfort level of 5-6 per cent.

"At the moment, the RBI's bias appears to prioritise inflation management over growth. We expect the RBI to hike the key policy rates (repo and reverse repo) by 25 bp each," Barclays said.

Datar too expect the RBI to tighten rates by another 75 bps in 2011.
Finance Minister Pranab Mukherjee had last week said that though the food inflation has come down, it was still at "unacceptable" high level.

According to latest figures, it has, however, dipped to 9.52 per cent for the week ended February 26.

The government has taken various steps in the Budget like special initiative for agriculture, supply chain management, promotion of coal chains among others, Mukherjee said.

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