Retail inflation cools to 11-month low of 3.69% in August

Retail inflation cooled to an 11-month low of 3.69 per cent for the month of August compared to 4.17 per cent in July, raising hopes that RBI may not go for another rate hike in the next monetary policy meeting.

By BusinessToday.In  
Wednesday, September 12, 2018

Retail inflation cooled to an 11-month low of 3.69 per cent for the month of August compared to 4.17 per cent in July and 3.28 per cent in the same period last year.

The drop in inflation was mainly due to a fall in prices of kitchen items, including fruits and vegetables, official data showed Wednesday.

CPI inflation was at 3.58 per cent in October 2017 and has remained above RBI's targeted rate of 4 per cent since then.

The Reserve Bank of India (RBI) will be considering this set of data for formulating its next bi-monthly monetary policy on October 5.

The central bank has been mandated to keep retail inflation at 4 per cent level (with a margin of 2 per cent on either side).

The easing of inflation below the RBI's level raises hopes that RBI may not go for another rate hike in the next policy review.

The Monetary Policy Committee (MPC) of the RBI had, in its last policy review, noted that uncertainty around domestic inflation needs to be carefully monitored in the coming months.

"The main reason for increasing of the repo rate has been done to maintain the 4 per cent inflation target, a target from which we have been away for several months," the RBI Governor had said.

"The increase in MSPs for kharif crops, which is much larger than the average increase seen in the past few years, will have a direct impact on food inflation and second round effects on headline inflation," the Monetary Policy Committee had said.

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