Retail inflation dropped to 6.8% in Aug as veg, edible oil prices fall

While vegetable prices led by TOP (tomato, onion and potato) have moderated in August, there are no indicators to show continued moderation [View in browser]( [See all newsletters]( 13 September 2023 Retail inflation dropped to 6.8% in Aug as veg, edible oil prices fall [Vegetable prices led by TOP (tomato, onion and potato) have moderated in August,] Fall in [vegetable]( and [edible oil]( prices pushed retail inflation based on Consumer Price Index (CPI) below 7 per cent in August to 6.8 per cent. It was 7.4 per cent in July. However, cereal prices are still high. Experts do not see any change in policy repo rate next month when Monetary Policy Committee (MPC) will meet. This means interest rates on loan may not see any change for the time being. - Also read: [Need to be vigilant about evolving retail inflation trajectory: RBI]( While vegetable prices led by TOP (tomato, [onion]( and [potato]( have moderated in August, there are no indicators to show continued moderation. Also, uneven monsoon has affected kharif sowing which has some impact on cereal prices. However, one good development is that core inflation (CPI excluding food and beverages, fuel and light and petrol and diesel) came down to around 5 per cent from 5.1 per cent and thus recorded a third consecutive month of decline. [Vegetable prices led by TOP (tomato, onion and potato) have moderated in August,] Dharmakirti Joshi, Chief Economist with Crisil, said he expects headline consumer inflation to move down in September as vegetables, particularly tomatoes, have seen a sharp correction. That said, cereals and pulses remain a worry as monsoon continues to be deficient and sowing in pulses has been 8.6 per cent below last year’s levels. The recent spike in crude prices, if sustained, can create upside to fuel inflation which currently is at a benign 4.3 per cent, added Joshi. Joshi and other economists expect status quo in October policy review. “We expect the RBI to look through the July-August lift in inflation due to sharp spike in vegetable prices and maintain status quo on rates and stance in the October Policy,” Joshi said. - Also read: [Fuel price revision: Tight rope walk for govt amid surging food inflation volatile oil prices]( Breathing space Upasna Bhardwaj, Chief Economist with Kotak Mahindra, also felt these figures should provide some breathing space to the MPC. However, “we continue to remain watchful on the cereals, pulses and rising oil prices. Overall today’s readings reinforce our view of a prolonged policy rate pause with a clear caution on any risks arising for generalised inflation,” she said. There is also expectation that bond market will have some relief. Akhil Mittal, Senior Fund Manager (Fixed Income) with Tata Asset Management, expected slight downward movement in yields in near term, the persistence of inflation and trajectory will determine the larger move. “We expect 10-year benchmark G-Sec to trade in range of 7.10-7.25 per cent in near term,” he said.  You Might Also Like [Apple Event 2023: Apple unveils iPhone 15, new watches]( [Info-tech]( [Apple Event 2023: Apple unveils iPhone 15, new watches]( [AU Small Finance eyes Fincare SFB for acquisition]( [Money & Banking]( [AU Small Finance eyes Fincare SFB for acquisition]( [Gadkari warns of 10% ‘pollution tax’ over diesel vehicles]( [Logistics]( [Gadkari warns of 10% ‘pollution tax’ over diesel vehicles]( [August records all-time high e-way bill generation, indicating festival demand surge and GST growth]( [Economy]( [August records all-time high e-way bill generation, indicating festival demand surge and GST growth]( Stay informed Subscribe to our daily newsletter to stay up-to-date on the in deep news in India. [arrow]( Copyright @ 2023, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](