MUMBAI: Deutsche Bank estimates that India's consumer price index (CPI) firmed to 6.9% year-on-year in August, while core inflation likely stood at 6%.
The Asian nation will report the data next Monday.
While Brent crude oil prices have recorded a steep decline in recent weeks, the favourable impact will be less reflected in the CPI as fuel items account for a very small weight, Deutsche Bank said.
Meanwhile, the risks to food inflation persist with negative seasonality kicking in for the September-November period, the bank said
"Key vegetables tend to shoot up during this period," said Kaushik Das, chief economist for India and South Asia at Deutsche Bank.
Besides seasonality, Das highlighted that sowing of pulses has also fallen by 5% year-on-year.
"These could be potential risk factors, which could keep food inflation momentum high, consequently resulting in an elevated CPI closer to the 7% mark," he said.
The Reserve Bank of India will continue with rate hikes, likely delivering another 75 bps to 85 bps bump up in the rest of this financial year, Das said. "Though we would expect the central bank to hike rates in smaller clips from the September meeting, given the significant front-loading (around 200 bps - 205 bps of tightening has already happened) that has already been delivered to protect against future growth headwinds."
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