Retail inflation slows down to a 10-month low of 3.69 per cent

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According to the Ministry of Statistics and Programme Implementation, the retail inflation rate stood at a 10-month low of 3.69 per cent, below the Reserve Bank of India’s (RBI) medium-term estimation for the month of August.

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The decrease in prices of items like fruits and vegetables led to a significant drop in the retail inflation rate of the month of August 2018.

Last month i.e. in July 2018, retail inflation stood at 4.17 per cent. However, the 3.69 per cent inflation in August is close to RBI’s 4 per cent estimate for the month. The last time the actual rate was close to RBI’s target was in October 2017 when CPI inflation was recorded at 3.58 per cent.

Retail inflation is said to have cooled down in August because of the drop in food prices in the last month. The food inflation dropped to 0.29 per cent in August as against 1.3 per cent recorded last month.

The news of the ease of retail inflation rates leaves everyone hopeful that the RBI will not hike rates during its next Monetary Policy Meeting as it did in the previous two meetings.

As per the poll conducted by Reuters, economists believed that the retail inflation rate will be between 3.55 per cent and 5.4 per cent. However, nearly 75 per cent of them said that the inflation rate will be below the RBI’s target. The economists are of the opinion that the cooling of the retail inflation rate is only temporary and the weakening rupee and the rising crude oil prices will eventually lead to a hike in the inflation rate soon.

The core inflation rate, which does not include fuel and food sectors, is stated to be 6 per cent – a 0.3 per cent reduction from the month of July.

As per the report prepared by the International Monetary Fund (IMF), India is expected to witness a 5.2 per cent average inflation in FY 2018-19. IMF warns the country about the probable rise in inflation rate and expects the RBI to make necessary modifications in the monetary policy so as to bring inflation under control.

Source: Times of India

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