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LATEST NEWS UPDATES | Higher food prices accelerate retail inflation in October

Higher food prices accelerate retail inflation in October

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published Published on Nov 14, 2017   modified Modified on Nov 14, 2017
-The Economic Times

Consumer inflation touched a seven-month high in October denting hopes of rate cut when the Reserve Bank of India reviews the monetary policy next month.

Retail inflation, as measured by the consumer price index (CPI) rose to 3.58% in October from 3.28% in September, data released by the government showed.

“While we expect the RBI’s March 2018 projection to be revised down a notch, but October’s CPI and the likelihood that the 4% target will be tested in the next quarter, reinforces our expectations that the RBI will stay on hold in December and rest of FY18,” said Radhika Rao, economist, DBS Bank.

RBI will review the monetary policy on December 6. The October inflation is slightly more than the expected 3.5%. The reduction in GST on as many as 178 items is expected to ease inflationary pressures a bit in the coming months.

“The recent revision in GST rates for many items is likely to offset the impact of the surge in crude oil prices,” said Aditi Nayar, Principal Economist ICRA. “With the CPI inflation expected to track a rising trend over H2 FY2018 and print at around 4.5% in March 2018, there is a low likelihood of rate cuts in the immediate term,” Nayar said.

In its last policy review the RBI had kept interest rate unchanged last month, forecasting a rise in consumer inflation in the 4.2-4.6% range over October to March, above its medium term target of 4%. The rise in inflation was broad-based with housing, fuel & light and food & beverages contributing to the spike.

Retail inflation has risen sharply in recent months – climbing from 1.46% in June, the lowest since the government started releasing numbers in January 2012.

Inflation in food & beverages rose to 2.26% in October from 1.76% in the month before. Fuel and light inflation was up at 6.36% in October from 5.56% in the month before, tracking higher international crude prices.

Crude prices are at their highest since June 2016. The government has already cut duties once to cushion the impact of higher prices on consumer. Housing inflation was at 6.68% in October compared with 6.1% in September.

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The Economic Times, 14 November, 2017, https://economictimes.indiatimes.com/news/economy/indicators/higher-food-prices-accelerate-retail-inflation-in-october/articleshow/61629802.cms


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