How prices have moved since last MPC meeting

livemint.com:

NEW DELHI : The Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) is set to deliver its decision on the policy repo rate today, with the market expecting a status quo despite the surge in prices amid a hardening of bond yields. A pause, nevertheless, would be a challenge. Mint explains: The panel is expected to keep the repo rate unchanged at 6.50% for the fourth consecutive time as core inflation, which excludes food, fuel and light groups, has been below the central bank’s upper tolerance limit of 6% for six months.

This offers some respite from high food prices. MPC was hawkish at the August meeting, saying it would “maintain a close vigil on the evolving inflation scenario". While inflation has surprised on the upside, mainly due to vegetable prices, softening of core inflation at the same time and steady economic activity may not warrant any action now.

Yes, and this makes a status quo call more complex than it looks. Inflation jumped from 4.87% in June to 7.44% in July and 6.83% in August. The sharp jump came from vegetable inflation, which has averaged 31.8% in these two months.

While vegetable prices have corrected somewhat, cereal and pulses continue to rise. More worryingly, the recent surge in crude oil prices from around $85 per barrel in early August to $95 currently could play an important role in setting the tone. At the same time, bond yields have hardened by around 10 basis points due to the volatile global scenario.

RBI is expected to keep its gross domestic product (GDP) and inflation projections unchanged at 6.5% and 5.4%, respectively for 2023-24. While RBI had projected inflation at 6.2% for July-September, the average for July-August has been much higher at 7.1%. However, this may get