Retail Inflation in India Hits 3-Month Low
Retail Inflation Rate Declines to 5.10%
India’s retail inflation rate reached a three-month low of 5.10% in January, as the prices of certain food items rose at a slower pace. However, the central bank is expected to hold off on rate cuts, as inflation remains above its target rate.
Annual Retail Inflation Eases to 5.10%
The annual retail inflation rate in January eased from 5.69% in December, according to government data. This figure was in line with the 5.09% forecast by a Reuters poll of 44 economists.
Reserve Bank of India’s Stance
Last week, the Reserve Bank of India (RBI) opted to keep interest rates unchanged, signaling that rate cuts may not be imminent as the focus remains on stabilizing inflation at 4% on a sustainable basis.
Food Inflation Trends
Food inflation, which contributes to almost half of the overall consumer price basket, rose by 8.30% in January compared to a 9.53% increase in December. Prices of cereals and vegetables also saw slower year-on-year growth in January.
Economic Outlook
Despite strong urban demand, housing inflation has remained weaker than expected. India’s economy posted a faster-than-expected growth rate of 7.6% in the July-September quarter, with the government forecasting annual growth of 7.3% in the current fiscal year.
Impact of Food Price Shocks
Food price shocks due to climate vagaries and supply disruptions have been the primary drivers of inflation in the past year. The RBI has highlighted the impact of these shocks on the pace of disinflation, prompting measures such as lowering stock limits for wheat traders and banning certain food exports.
Expectations for Rate Cuts
Some economists anticipate that moderating food prices could alleviate pressure on retail inflation, potentially paving the way for rate cuts in the latter half of the year.
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