Data drive: Retail inflation remains benign

retail sector, retail industry, food industryFood inflation remained low at 0.5%, led by a sequential fall in food prices of 1.1% month-on-month.

Despite rising oil prices, a weaker rupee and higher agricultural minimum support prices (MSP), inflation remains subdued; food prices reported the tenth consecutive month of decline in September.

Core inflation (including petrol and diesel) moderated to 5.6% in September from 6.1% in August due to decline in housing inflation to 7.1%.

Food inflation remained low at 0.5%, led by a sequential fall in food prices of 1.1% month-on-month.

The fall in food prices was largely led by a sharp decline of 4.2% in vegetable prices. Prices of fruits, pulses, sugar, eggs, meat and fish continued to fall on a monthly basis. Historically, higher MSPs have pushed inflation up as early as August. But, this time, it still remains low.

In the international market, prices of wheat fell in September because of stronger export competition. Prices of maize also fell, reflecting expectations of a large crop in the United States. Even export prices of rice generally declined.

A Kotak Institutional Equities report says that given RBI MPC’s rigid focus on inflation and the expected benign trajectory in the near term, the scope for further rate hikes in FY19 has diminished. HSBC expects a rate hike in Q1 of 2019 (pre-national elections) followed by another one in Q2-2019, taking the repo rate to 7% by the end of 2019.

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Source: Financial Express