Retail inflation at record low of 6.5% in Sept Retail inflation slowed significantly in September on the back of cooling food and fuel prices, bringing cheer to the government battling stubborn price pressures and providing headroom to the central bank to ease interest rates. Data released by the Central Statistics Office (CSO) on Monday showed inflation as measured by the consumer price index rose an annual 6.46% in September, slower than 7.73% in August and 9.84% in September 2013. This was the lowest reading since the data was introduced in January 2012. The moderation in retail inflation comes at a time when the government has vowed to tame price pressures and the easing is expected to help in efforts to revive growth. Food inflation slowed to 7.6% year-on-year in September and fuel inflation eased to an annual 3.5%. Vegetable prices slowed to 8.6% year-on-year in September, while eggs, meat and fish rose 6.4%, well below the double-digit rates in the past few months. Prices of cereals and pulses softened. Only milk and milk products and fruit prices remained stubborn. Economists said the data provides comfort for policy makers but the central bank may still want to wait, before deciding on interest rates. Authorities would also prefer to assess the impact of patchy monsoon rains on food supplies and the price situation. “For four consecutive months, CPI inflation has been at or below the RBI’s target of 8% for January 2015. There are still upside risks to achieve this target, especially as GDP growth begins to recover gradually. Also, the government and RBI are currently finalizing the new monetary policy framework to be implemented from April 2015. Therefore, we believe that RBI will remain on hold for the rest of this fiscal,“ said ratings agency Crisil. RBI has consistently cautioned about the inflationary pressures in the economy and has maintained a tight hold on interest rates.However, moderation in inflation and easing of global crude oil prices provide some cushion. “While food inflation has registered a slowdown, the impact of this years sub-normal and regionally skewed monsoon is likely to show effect from next month onwards,“ said Madan Sabnavis, chief economist at Care ratings. “Our view is that while these are positive signs, RBI would observe these movements in October and November before taking a call on interest rates,“ he added.
Posted on: Tue, 14 Oct 2014 11:22:44 +0000
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