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UPDATE 1-India cbank chief expects inflation to trend lower in Jan-Mar

Source : REUTERS
Last Updated: Thu, Dec 06, 2012 11:10 hrs

(Updates to add quotes, background)

KOLKATA, Dec 6 (Reuters) - India's inflation is expected to trend lower during January-March, the Reserve Bank of India Governor Duvvuri Subbarao said on Thursday, a month after he had indicated the central bank might ease monetary policy as early as January.

"It (inflation) has come down from its peak, but at 7.50 percent, inflation is still high," he told reporters after the central bank's board meeting in the eastern city of Kolkata.

"We are expecting that inflation will trend down starting the fourth quarter of this fiscal year. As we go into our mid-quarter policy on Dec. 18 and the quarterly policy on Jan. 29, we will take into account the growth-inflation trajectory and calibrate our monetary policy accordingly."

The headline inflation rate, based on the wholesale price index, rose an annual 7.45 percent in October, the slowest pace in February.

The RBI projects WPI at 7.5 percent at March-end, after revising the projection upwards twice earlier this year.

The Indian central bank, which was a hawkish outlier long after many central banks began loosening policy, has refrained from lowering rates following sticky and elevated inflation since the April rate cut despite slowing growth.

However, pressure from government and industry bodies has mounted over the last few months to cut policy rates due to the sharp slowdown in economic growth.

India's services sector, which makes up nearly 60 percent of economic output, grew at its weakest pace in over a year in November, an HSBC services Purchasing Managers' Index , showed on Wednesday.

In the October review of the monetary policy, Subbarao said there was a "reasonable likelihood" of further easing in the January-March quarter. (Reporting by Shamik Paul, writing by Neha Dasgupta; Editing by Jonathan Thatcher)



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