India's February inflation ticked higher at 6.8%

It was stronger than expected.

According to DBS, February WPI inflation came in modestly firmer than consensus, at 6.8% (YoY) compared with expectations of 6.6% and January’s 6.6%. 

On sequential basis, however, the pace of rise was a third stronger than DBS had anticipated, up 1.1% (MoM, sa). This is also double the average pace registered during April 2012 -January 2013.

Along expectations, bulk of the headline WPI inflation increase was driven by the upward adjustment in the prices of administered fuel products earlier this year.

Here's more from DBS:

The price index for diesel and liquefied petroleum gas jumped 19% (YoY) and 26% respectively in February. On the other hand, as we had flagged, the food price index was subdued.

The manufactured WPI inflation also pulled back, notably the non-food manufacturing index (proxy for core), slipped below the 4.0% mark, a first since late-2009.

How will this outcome influence RBI rate decision next week – not by a considerable extent, in our view. After all, the central bank will base the decision on number of factors, in addition to the inflation trajectory.

Admittedly the slight uptick in headline WPI is not comforting, but it is primarily driven by the adjustment in the suppressed price elements, something that the RBI had called for in the past.