Retail inflation eases to 4-month low at 4.87% in October; relief may be very brief

Core inflation also falls, but economists foresee worrying signs [View in browser]( [See all newsletters]( 14 November 2023 Retail inflation eases to 4-month low at 4.87% in October; relief may be very brief [ Food inflation has remained stable in October at 6.61 per cent, while in September, cereals inflation remained in the double digits at 6.62 percent] A supportive base and moderation in non-food prices pushed headline retail [inflation]( based on the Consumer Price Index (CPI) to a four-month low of 4.87 per cent in October. [It was 5.02 per cent in September](. Incidentally, the June print was also 4.87 per cent. Core inflation (headline inflation minus inflation of food and fuel) also dropped to 4.23 per cent from 4.52 per cent. But going by the trend, economists believe that the RBI’s Monetary Policy Committee (MPC) will continue its pause on policy rates. After hiking the rate by 2.5 per cent, the MPC has opted for a pause button as many as four times in succession. [ Food inflation has remained stable in October at 6.61 per cent, while in September, cereals inflation remained in the double digits at 6.62 percent] - Also read: [Demand-supply mismatch causing frequent bouts of vegetable inflation]( Five concerns Though headline inflation is down, economists foresee worrying signs. Devendra Kumar Pant, Chief Economist with India Ratings and Research, listed five concerns: Food inflation remained stable in October at 6.61 per cent, while in September, cereals inflation remained in the double digits at 6.62 percent. 2. An increasing spiral of eggs, fruits, pulses, and product inflation. 3. decline in fuel and lights and transport and communication inflation (due to freeze in pump prices of petrol and diesel). 4. a decline in miscellaneous (mainly services) inflation; and 5. a decline in core inflation (weakness in demand). Echoing the sentiment, Swati Arora, an economist with HDFC Bank, said persistence in pulses and cereal inflation is worrisome and poses an upside risk to food prices. “CPI inflation is expected to clock a print above 5 per cent both in November and December and average around 5 per cent in Q4 FY24,” she said. Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said: “We expect the trend of sub-5 per cent headline inflation to remain brief, with most of FY24 ahead likely to remain above 5 per cent.” - Also read: [Monetary policy remains watchful and actively disinflationary: RBI Guv]( Interest rate The big question is what will happen to the policy interest rate. Aditi Nayar, Chief Economist with ICRA, estimated that CPI inflation would climb to 5.6 per cent by December 2023 and remain in a wide range of 4.9–5.6 per cent thereafter for the next two quarters before a particularly benign base effect temporarily dampens it in Q2 FY2025. “We expect the MPC to maintain a hawkish tone amidst a status quo on rates and stances in its upcoming policy meeting,” she said. You Might Also Like [Sparkling Diwali sales bring cheer to retailers and manufacturers]( [Economy]( [Sparkling Diwali sales bring cheer to retailers and manufacturers]( [Manufacturing sector growth expected to continue: FICCI survey]( [Economy]( [Manufacturing sector growth expected to continue: FICCI survey]( [Consumer durable loans from banks down 42% since January]( [Data Focus]( [Consumer durable loans from banks down 42% since January]( [IPO-bound Go Digit gets notice, advisory from insurance regulator]( [Markets]( [IPO-bound Go Digit gets notice, advisory from insurance regulator]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from 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](