Retail inflation in India hits four-month high in December

The retail inflation or Consumer Price Index December came at 5.69 per cent in December, against 5.55 per cent in November. The October consumer price index (CPI) was at 4.87 per cent and 5.02 per cent in September.

The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

The higher month-on-month retail inflation comes close on the heels of RBI having maintained the status quo in the repo rate for the fifth straight occasion, besides flagging concerns on the inflation outlook.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Uncertainties in food prices along with unfavourable base effects are likely to lead to a pick-up in retail inflation in November and December, the monetary policy committee of the Reserve Bank of India observed in their latest review meeting.

"The MPC (monetary policy committee) observed that recurring food price shocks are impeding the ongoing disinflation process," the minutes of the RBI meeting read.

"Domestic food inflation unpredictability and volatility in crude oil prices and financial markets in an uncertain international environment pose risks to the inflation outlook. The path of disinflation needs to be sustained. The MPC will carefully monitor any signs of generalisation of food price pressures which can fritter away the gains in easing of core inflation."

RBI meanwhile maintained India's retail inflation projections for 2023-24 at 5.4 per cent, with Q3 at 5.6 per cent and Q4 at 5.2 per cent. CPI inflation for Q1:2024-25 is projected at 5.2 per cent; Q2 at 4.0 per cent; and Q3 at 4.7 per cent, with risks evenly balanced. (ANI)