Retail inflation at 7.35 per cent; likely to make RBI hold rate cut

India’s retail inflation data measured as Consumer Price Index (CPI) surged to nearly 7.35 per cent for the month of December 2019, as against 5.54 per cent in the previous month. This was on account of the jump in food inflation, which stood at 14.12 per cent, as against 10.01 per cent in the previous month led by a higher vegetable inflation of 60.5 per cent in December 2019, as against 36 per cent in the previous month.

The core inflation which excludes the volatile items like food and oil prices stood at 3.7 per cent, as compared to 3.5 per cent, in November 2019.

With this surge, inflation has crossed the higher threshold limit of 6 per cent set by the country’s central bank, that is, Reserve Bank of India (RBI). With this increase in inflation, the rate cut in the upcoming monetary policy meet is unlikely. However, this inflationary pressure is mainly on the account of short-cycle crops (higher onion prices). Thus, going forward, normalisation of the supply is likely to cool down retail inflation.

Housing inflation during the month was 4.3 per cent as against 4.5 per cent in November 2019. Further, the fuel and light inflation was at 0.7 per cent while, health inflation was lowered to 3.8 per cent from 5.5 per cent in the previous month.