January’s inflation cool-off: Not too sharp
Inflation in January dropped modestly, thanks to a cool-off in food prices. Government data released on Monday showed the benchmark consumer price inflation rate declining to 5.1% year-on-year, compared with 5.7% in December, with food inflation easing to 8.3% in the first month of 2024 from 9.5% the month before. While inflation’s declining trend is comforting, this drop isn’t as sharp as some economists had expected.
Food inflation, in particular, remains unhealthily high. So, it’s unlikely that this would do much to hasten a pivot in monetary policy. The Reserve Bank of India (RBI) has been unambiguous in its pursuit of price stability and wants inflation held at 4% on a sustained basis.
Clarity on whether that is happening will only come in later quarters. RBI’s forecast for next fiscal year is 4.5%, with an uptick in the second half. January’s reading is unlikely to alter its view.
That said, core inflation has also dropped, which suggests RBI’s past rate hikes are working. This should ease its concerns about slow policy transmission. And with economic growth holding strong, the central bank will have little reason to shift its attention away from inflation.
. Read more on livemint.com
