WPI can climb up to 8-8.5% in Nov-Dec: RBS

He expects the RBI to cut rate in October. "There is perhaps a growing case for about 25 bps cut in the October-December quarter," he adds.

Below is the edited transcript of his interview on CNBC-TV18.

Q: What are your thoughts with regards to the consumer price index (CPI) data?

A: It is slightly lower than what I was expecting. I was expecting a number around 10.2%. In the month of August, you saw food product prices rising fairly sharply. The weightage of food in CPI is much higher than the weightage of food in the WPI. It’s basically wholesale and retail level inflation. So, we know that prices of food products like sugar and food articles like pulses and all went up fairly sharply in the month of August. So, I was expecting the overall number to be in double digits. I was expecting it to be around 10.2%.

Yesterday, RBI pointed out that core CPI is going up. Between June and July, core CPI has gone up. I would think that perhaps food have continued even in this month, though the momentum would have been lower considering that the increase marginally would have been on account of higher food prices. Fuel prices also went up sharply in the month of August.

Q: What is the sense you are getting from the RBI’s next course in October? Would it be undecided? Does it go into it with open mind that it will look forward to the September inflation or do you think it has no space?

A: The space is extremely limited. The space is not more than 50 bps. Inflation numbers, over the next three-four months, both the headline and WPI and to some extent even CPI numbers because food inflation tends to pick up post September, would continue to remain in fairly uncomfortable territory for the RBI. So, they would closely watch how core numbers pan out both on WPI and on CPI.

Other than that, they would also look to see with the measures taken by the government now and with QE3, does the rupee stay or gains some ground? To the extent rupee gains some ground, it tends to negate the effect of higher global crude oil prices. That would start to show up in non-administered fuel prices as in the next couple of months and as we saw in the month of August as well.

I do not think RBI’s job will be any easier. They pointed out yesterday that despite growth risk increasing the fact that inflationary pressures have been so persistent that they have to continue with keeping a firm handle on inflation. But there is perhaps a growing case for about 25 bps cut in the October-December quarter. Anything other than that, I do not see anything coming from RBI on an aggressive manner.