Retail inflation slows to 9-month low at 4.17%

A vendor arranges vegetable at his stall in a market in Mumbai

A vendor arranges vegetable at his stall in a market in Mumbai

With this decline, and a higher industrial production growth rate in June, the chance of another policy rate hike in October has faded.

Government data released on Monday revealed that the rates of inflation for vegetables were negative (-2.19 per cent) along with pulses (-8.91 per cent) and sugar and confectionery (-5.81 per cent).

The rise in global fuel prices has led to a continuous increase in inflation in the fuel and light segment, Mr. Pant added.

The lower inflation has surprise many, considering the heavy rains.

"The core CPI inflation recorded only a mild decline in July 2018, with an uptick in inflation for miscellaneous items weighing against the correction in the other components", said Aditi Nayar, principal economist at ICRA.

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"Unfavourable base effect of June 2017 turned favourable in July".

In the last two reviews RBI has raised the key repo rate by 0.25 per cent each on inflationary concerns.

"If the recent depreciation of the INR sustains, it may modestly feed into the CPI inflation over the near term". The IMD had projected a normal monsoon this year, but its distribution and intensity will be crucial for kharif crop output, which in turn will impact food inflation.

Whilst there continues to be upward pressure from increasing oil costs, on both petrol and oil for heating, travel costs have been causing less pressure on inflation than in previous months.

Food inflation in July stood at a provisional 1.37 per cent, compared with 2.91 per cent in the previous month, the Central Statistics Office noted in its statement. The numbers mean, inflation has now stayed above the Reserve Bank of India's (RBI) 4 per cent target for the ninth straight month. "The deteriorating external situation could be a big factor that influences the MPC even as they closely watch the inflation trajectory going forward", he said. A Reuters poll of economists had predicted the inflation to come at 4.51 per cent.

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