Retail inflation softened for the second consecutive month in December, reaching a four-month low of 5.22%, down from 5.48% in November. The decline was driven by moderating prices of food items such as pulses and vegetables, according to data released by the National Statistics Office (NSO).
Food inflation, measured by the Consumer Food Price Index (CFPI), also fell to 8.39% in December from 9.04% in November. Despite the easing trend, food inflation remains a concern, economists noted.
The headline inflation rate, based on the Consumer Price Index (CPI), dropped below the Reserve Bank of India’s (RBI) upper target limit of 6% for the second straight month but stayed above the baseline 4% mark.
Potential RBI Policy Pause in February
Experts predict that RBI Governor Sanjay Malhotra may hold off on any interest rate cuts during the February policy review due to global uncertainties.
HDFC Bank economists Sakshi Gupta and Mayank Kumar Jha stated, “While inflation is expected to moderate due to seasonal factors, the RBI may prefer caution before starting the rate cut cycle, likely by April.”
Food Prices Show Mixed Trends
In December, the inflation rate for perishables like vegetables fell to 26.56% from 29.33% in November. Pulses inflation eased to 3.83% from 5.41%, and cereals dipped to 6.51% from 6.88%. Milk prices saw a minor drop to 2.80% from 2.85%.
However, the inflation rate for oils and fats surged to a 33-month high of 14.6%. Fruits inflation rose to 8.49% from 7.68%.
Core Inflation and Housing Prices Decline
Core inflation, excluding food and fuel, dropped to a three-month low of 3.6%. Housing inflation eased to 2.71% from 2.87%, while inflation for clothing and footwear remained nearly unchanged at 2.74%.
Positive Outlook on Rabi Sowing
Experts anticipate better rabi sowing prospects will help reduce food inflation further. Paras Jasrai, Senior Economic Analyst at India Ratings & Research, remarked, “The progress in rabi sowing should cool food inflation. While the current data supports a positive outlook, the RBI may wait another policy cycle before adjusting rates.”
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