Wholesale inflation to moderate further; to average 2.8% in 2018: Nomura

New Delhi: WPI inflation is expected to moderate further in the coming months, and is likely to average 2.8 percent in 2018, says a Nomura report.

According to the Japanese financial services major, a moderation in WPI inflation in the coming months is likely owing to falling vegetable prices and favourable base effects.

"Looking ahead, with food prices (vegetables) falling further in recent weeks and favourable base effects on fuel inflation until January 2018, we expect WPI inflation to moderate further in the coming months, before stabilising," Nomura said in a research note.

Nomura expects WPI inflation to average 2.8 percent year-on-year in 2018 from 3.1 percent in 2017.

According to the official data, wholesale inflation fell to 2.60 percent in September as prices of food articles, led by vegetables, softened.

Inflation, based on the wholesale price index (WPI), had soared to a four-month high of 3.24 percent in August 2017. It was 1.36 per cent in September 2016.

Nomura said the recent WPI data suggests that input costs (food and fuel) have moderated, while output prices (core WPI) have moved marginally higher.

"However, we believe the rise in core WPI inflation largely reflects higher commodity prices (especially steel), and not necessarily demand-side pressures," it said.

Earlier this month, the Reserve Bank kept benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 percent for the current fiscal.

It also raised its inflation forecast to a range of 4.2 to 4.6 percent during remainder of current fiscal as against 4 to 4.5 percent previously.