India's Retail Inflation Is Stable At 5% YoY For January 2015;

Consumer inflation continued to be stable at 5.1% in January 2015 (year-on-year), against previous month's inflation of 5% YoY, while core inflation came in at 3.9%. Food inflation inched up, while fuel and housing experienced slower inflation.

Core-inflation (inflation excluding food & fuel) continued to trend downwards - at 3.9% YoY during the month, against 5.2% in Dec'14.

Source: MOSPI

January inflation print should be comfortable news for the inflation-targeted central bank, as it remains well below the target of 8% set for Jan'2015. The new series of CPI data was one of the key data points, the RBI was looking for, as stated in the previous monetary policy statement. The governor had stated that the central bank is comfortable with real policy rates in the range of 1.5%-2%. Hence we believe that, the current month inflation number provides room for the RBI to cut rates. We reiterate our view of 25bps rate policy rate cut in March 2015.