Inflation falls for first time in 6 months; July CPI inflation breaks rising streak

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Updated: August 13, 2019 6:21:34 PM

Snapping the 6-month rising streak, the retail inflation fell in the month of July, the government data released on Tuesday showed.

WPI inflation eases to near 2 year low at in June 2019The Reserve Bank of India (RBI), in its August bi-monthly policy, cut the interest rates by 35 bps.

Snapping the 6-month rising streak, the retail inflation fell in the month of July despite rise in the food prices, the government data released on Tuesday showed. The CPI-based inflation was reduced to 3.15 per cent in the last month. In June 2019, CPI inflation had soared to 3.18 per cent compared to 3.05 per cent in the previous month. According to the data released by the Central Statistics Office (CSO), the inflation in the food basket was 2.36 per cent in July, marginally up from 2.25 per cent in the previous month. The cereals inflation remained unchanged at 1.31 per cent in July. The fuel and light inflation stood at (-) 0.36 per cent as against 2.32 per cent in the previous month. The vegetables inflation was at 2.82 per cent compared to 4.66 per cent in the last month.

A Reuters poll of 30 economists showed retail inflation will rise to 3.20 per cent in July from a year ago, a touch above June’s 3.18 per cent. The July core CPI-based inflation stood at 4.3 per cent as against 4.2 per cent in the previous month, the data also showed. The core inflation, which excludes volatile components such as food and energy, has been on a downward trajectory since February, suggesting a lack of demand and weak economic activity.

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“The uptick in the core-CPI inflation to 4.4% in July 2019 from 4.3% in June 2019, was fairly broad-based. The core-CPI inflation may not ease meaningfully from the current levels, in our view, as demand for services will remain sticky even during an economic slowdown,” Aditi Nayar, Principal Economist, ICRA said.

The Reserve Bank of India (RBI), in its August bi-monthly policy, cut the interest rates by 35 bps. It was the fourth rate cut in a row in this calendar year by the central bank. The RBI primarily consider the CPI-based inflation in its policy formation.

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