Even though retail inflation in August dipped to a 10-month low of 3.69 percent, weaker rupee and rising crude oil prices may exert pressure on CPI inflation going forward, say experts.
CPI inflation in August: Even though retail inflation in August dipped to a 10-month low of 3.69 percent, weaker rupee and rising crude oil prices may exert pressure on CPI inflation going forward, say experts. It is a continuous slide for the second straight month against the backdrop of base effect and a plunge in prices in the food category.
“Fuel and light inflation at 8.5 per cent (in August) was highest in last 60 months. However, other component affected by petroleum products prices — transport and communication — witnessed 60 basis points decline in inflation in August 2018 over July 2018. Going forward weaker currency and elevated crude oil prices will continue to exert pressure on inflation of these two commodity groups,” Devendra Kumar Pant, chief economist, India Ratings said.
The CPI inflation rate of 3.69 percent in August is well within the RBI’s mandated range of 4.6 percent for July-September period. However, continuing rupee fall and high crude oil prices may complicate the central bank’s next monetary policy decision.
“The looming impact of revised MSPs, surge in crude oil prices and sharp weakening of the INR would push up the inflation prints in H2 FY2019. Headline CPI inflation appears likely to range between 4.6-5.0% in Q4 FY2019. The dip in the August 2018 CPI inflation below the Monetary Policy Committee’s medium-term target of 4.0%, juxtaposed by the looming inflation risks, the robust GDP growth print for Q1 FY2019 and the continued weakening of the INR, would complicate the next monetary policy decision,” Aditi Nayar, principal economist, ICRA said.