August inflation: What CPI data tells us beyond the base effect, in charts

livemint.com:

India’s August inflation remains within RBI’s sweet spot, sparks hopes of a rate cut. What could be a relief is that the food and beverages index declined 0.3% in August from July. This is the first time since January that there has been a sequential easing in this group.

However, all other groups saw month-on-month increases, suggesting they are seeing mild price pressures. Within food and beverages, the major source of the decline was vegetables, which fell by 2.5% month-on-month in August compared to an increase of 14.1% in July. However, the correction was not as big as economists had expected.

“Although vegetables declined by 2.5% on a sequential basis in August 2024 after rising by 14% in each of the previous two months, the extent of the contraction was much smaller than our expectations," said Aditi Nayar, chief economist at ICRA. Also read: What the gold rally says about market uncertainty Eggs, meat and fish was another major component that saw a sequential decline. However, a sharp rise in fruit prices and a continued increase in cereals and pulses prices in August remain a worry.

While some moderation in food prices may offer respite, its volatile nature has kept policymakers on their toes. Moreover, with the base effect fading from this month, inflation is expected to rise again. “We anticipate a sharp pickup in the CPI inflation to 4.8% in September, and between 4.4% and 4.7% in the second half of 2024-25," Nayar added.