Pushed up by double-digit food inflation, the retail price inflation rate rose to an eight-month high of 7.34 per cent in September from 6.69 per cent in August. This was the sixth month in a row that the inflation rate remained above RBI's comfort zone of above six per cent, and may not allow the central bank' monetary policy committee (MPC) to cut the repo rate in its December review too.
In fact, the consumer price index (CPI)-based inflation rate stood moderately higher at 6.92 per cent in the second quarter of 2020-21 than 6.8 per cent projected by the Reserve Bank's MPC in its latest policy review.
Food inflation rose to a seven-month high of 10.68 per cent in September after remaining below double digits for four months. It was 9.05 per cent in August.
Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, said,"The increase in September print is higher than what the market expected as food prices still remain a concern on lingering supply disruption. Unless the inflation falls below the higher band of six per cent, we don’t expect RBI to cut rates despite its governor (Shaktikanta) Das stating to ‘look through inflation’".
However, he said as the supply shocks dissipate as the economy continues to unlock, inflation may fall back to the tolerance band of 2-4 per cent. The central bank expects CPI to fall in the 2-6% target in the second half of FY21.
Nish Bhatt, founder & CEO, Millwood Kane International - an investment consulting firm, said the rise in inflation will affect RBI's ability to act on rates as it would like to see the inflation rate dropping below the six per cent mark on a durable basis before taking a decision.
The food inflation got a push from vegetable prices as the inflation rate saw a spurt to 20.73 per cent in September from 11.41 per cent in the previous month.
Inflation rate saw a jump in non-vegetarian items as well. Meat and fish saw it rising to 17.60 per cent 15.60 per cent in this period. In eggs it increased to 15.47 per cent from 10.11 per cent.
Transport and communication continued to cost heavily. The inflation rate in this category rose to 11.50 per cent from 11.05 per cent.
Inflation rate on personal care and effects came down but it remained elevated. It sood at 12.31 per cent in September against 14.45 per cent in August. The crucial item of health these days saw inflation rising to 4.90 per cent from 4.71 per cent. Fuel and light gave some sort of relief to consumers as its inflation rate fell to 2.87 per cent from 3.10 per cent.
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