CPI inflation eases to 5.1% in January 2018

CPI inflation eases to 5.1% in January 2018

As per data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, food inflation saw a marginal decline to 4.70 percent in January from 4.96 percent in December previous year.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks, crucial for implementation of monetary policy.

Among the CPI components, inflation of food and beverages eased to 4.58% in January 2018 from 4.85% in December 2017 mainly contributing to the decline in CPI inflation.

"Food inflation benefited from the decline in vegetable prices, which we generally see during winter". The manufacturing sector outperformed, clocking an 8.4 per cent growth on a year-on-year basis. A Reuters poll of 26 economists had projected it at 5.14 per cent. However, the inflation jumped for pulses and products to -20.19%, spices -1.43% and meat and fish 4.34% in January 2018.

The hardening of inflation has forced the RBI to keep the lending rates unchanged.

"Apart from oil prices, monsoons will be the key factor for inflation".

The central bank has raised its inflation forecast to 5.1 percent for the January-March quarter, compared with 4.6 percent for October-December, citing price pressures from higher import taxes announced in the budget on February 1, pushing up food and fuel prices. Despite keeping its stance as "neutral", the central bank has raised its concerns.

The General Index for the month of December 2017 stands at 130.3, which is 7.1% higher as compared to the level in the month of December 2016. The central bank warned that it would closely monitor inflation but also said economic growth needed to be "carefully nurtured". Thereafter, CPI readings could touch 6 percent by the summer. In fact, if the softening expected in 2H-FY19 does not materialise, the risk would be that of a rate hike somewhere down the line.

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