This story is from August 14, 2018

Retail inflation eases to 4.2% on food, veggies

Retail inflation cooled in July on the back of easing food and vegetable prices, prompting economists to say that the Reserve Bank of India (RBI) may hold interest rates when it reviews Monetary Policy in October.
Retail inflation eases to 4.2% on food, veggies
Representative image
Key Highlights
  • Data released by the Central Statistics Office (CSO) showed inflation, as measured by the Consumer Price Index (CPI), rose an annual 4.2%
  • The sharp uptick in retail and wholesale price inflation in the past few months had raised concerns over sticky price pressures
NEW DELHI: Retail inflation cooled in July on the back of easing food and vegetable prices, prompting economists to say that the Reserve Bank of India (RBI) may hold interest rates when it reviews Monetary Policy in October.
Data released by the Central Statistics Office (CSO) on Monday showed inflation, as measured by the Consumer Price Index (CPI), rose an annual 4.2 per cent, slower than the previous month’s 4.9 per cent.
Rural inflation was at 4.1 per cent in July while urban inflation was at 4.3 per cent.
The sharp uptick in retail and wholesale price inflation in the past few months had raised concerns over sticky price pressures. The RBI had raised interest rates twice to calm inflationary pressures and had flagged inflation as a concern. A household survey of inflationary expectations had also pointed to some pressure on the prices front.
The CPI data on Monday showed vegetable prices declined an annual 2.2 per cent, while sugar and confectionary contracted 5.8 per cent. Pressure was visible on housing and fuel segments. Housing rose 8.3 per cent while fuel and light nearly 8 per cent during the month.
Economists said they expect the RBI to pause in its rateraising cycle, given the easing in some pressure points. “The core inflation, which was moving in upward trajectory, has also shown signs of cooling and has moderated to 6.3 per cent from the month before level of 6.4 per cent,” said Saumya Kanti Ghosh, group chief economic advisor at State Bank of India (SBI).
“The MPC (Monetary Policy Committee) will have two inflation readings before the October policy. With the August inflation number tracking below July and core expected to continue its downward journey, we expect RBI to be on hold in October policy,” added Ghosh.
Aditi Nayar, principal economist at ratings agency ICRA, said if the recent depreciation of the rupee sustains, it may modestly feed into the CPI inflation over the near term. “Crude oil prices continue to display a volatile trend, driven by geopolitical risks and concerns regarding supply as well as demand in various parts of the world,” she said. “The CPI inflation in the second quarter of FY2019 looks set to lag the MPC’s estimate of 4.6 per cent, reducing the likelihood of a rate hike in the October 2018 policy review,” added Nayar.
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