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Consumer Inflation Eases To 2.05% In January, Lowest In 19 Months

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Consumer inflation stood at a provisional 2.05 per cent in January, its lowest since June 2017, government data showed on Tuesday. That marked a sixth consecutive month in which inflation came in within the central bank’s medium-term target. At 2.05 per cent, inflation in January was lower than economists’ expectations. Economists had on an average expected inflation at 2.48 per cent in January, according to a poll of 30 economists surveyed by news agency Reuters before the last RBI policy meeting. Consumer inflation in December was revised downwards to 2.11 per cent from 2.19 per cent, according to the official statement.

The Reserve Bank of India earlier this month eased its monetary policy, by reducing the repo rate – the key interest rate at which it lends short-term funds to commercial banks – by 0.25 per cent to 6.25 per cent. That was largely seen as a move by the RBI that could lead to lower EMIs (equated monthly instalments) for loan borrowers. The central bank also changed its policy stance to “neutral” from “calibrated tightening”, a shift that allows it to act either way on the key rates. (Also read: State Bank of India lowers interest rates on home loans up to Rs 30 lakh) 

The RBI has maintained a medium-term goal of 4 per cent for consumer inflation, which it tracks primarily to formulate its policy. Consumer inflation – determined by Consumer Price Index (CPI) – indicates the rate of increase in consumer prices.

(Also read: RBI projects economic growth at 7.4% in 2019-20)

The central bank has set an inflation target of 2.8 per cent for the last quarter of the current financial year ending March 31. In its February 7 policy statement, it projected consumer inflation at 3.2-3.4 per cent in the first half of next financial year, beginning April 1. For the third quarter of 2019-20, the inflation target is set by the RBI at 3.9 per cent.

Consumer inflation had stood at 1.46 per cent in June 2017.

Separate official data showed growth in industrial production – determined by Index of Industrial Production (IIP) – picked up to 2.4 per cent in December. Factory output growth had stood at 0.5 per cent in the previous month, the slowest rate of growth recorded since June 2017. 

Source: NDTV Profit