A report has said that consumer price inflation is likely to rise above RBI's medium-term target of 4 per cent in 2017-18 due to factors like rise in rural wages and transient impact of goods and services tax (GST).
According to the report by UBS, the uptick in underlying price pressure could push the RBI to hike rates this fiscal. The global brokerage has estimated average consumer price index (CPI) inflation, excluding the house rent allowance, is expected to be at 4.2 per cent and 4.5 per cent for 2017-18 and 2018-19, respectively.
Further, UBS has estimated CPI inflation (excluding HRA) in second half of 2017-18 to average at 5-5.5 per cent, while the inflation in the first half of the fiscal is likely to be recorded around 3-3.5 per cent.
As per the report, UBS has attributed the possible rise in inflation to eight factors including rising consumption demand on remonetisation, a rise in rural wages, an increase in minimum support prices (MSPs) for agricultural crops and movement in global commodity prices and rising input costs.