Retail inflation softens to 19-month low of 2.05% in January

Retail inflation

India’s retail inflation declined marginally to 2.05 percent in January due to cheaper food items and fuel prices, data released by the government on February 12 showed.

Retail inflation for December 2018 has also been revised downward to 2.11 percent from the earlier estimate of 2.19 percent.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks. January’s data is an indication that inflation, which is little over 2 percent, is very close to the central bank’s lower tolerance level of inflation at 2 percent.

The central bank last week trimmed inflation forecast to 2.8 percent in January-March, 2018-19 and 3.2-3.4 percent in during April-September, 2019-20.

For the third quarter or October-December, 2019-20, the RBI expects retail inflation to be 3.9 percent.

The RBI also reduced repo rate by 25 bps, after retail inflation hit an 18-month low in December to rise 2.19 percent, led by softening crude oil prices and cheaper food items.

“It is noteworthy that the path of inflation has moved downwards significantly, and over the period of the next one year, headline inflation is expected to remain contained below or at the target of 4 per cent. This has opened up space for policy action,” RBI Governor Shaktikanta Das said last week.

Consumer food price index stood at (-) 2.17 percent in January from (-) 2.51 percent in December.

Prices of vegetables stood at (-) 13.3 percent versus (-)16.14 percent a month ago while pulses contracted (-) 5.5 percent in January from (-) 7.13 percent a month ago.
Fuel and light inflation was 2.2 percent in January compared to 4.5 percent in December while housing inflation was 5.2 percent versus 5.32 percent a month ago.

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