The fine print of October inflation data, in three charts

livemint.com:

Crisil. The play of price pressures and base effect in the coming months could keep the monetary policy committee (MPC) on its toes until its trajectory towards the medium-term aim of 4% becomes clear, economists said. What is keeping inflation still elevated is the higher prices of food items even as core inflation, which excludes food and fuel, has been consistently easing.

While spikes in vegetable prices (tomato prices in June and July) had made the situation worse temporarily, stickiness in some other food prices have become a cause of concern, especially in the context of low production in the country due to lower-than-expected rainfall. Prices of cereal and related products have eased but remain in double digits, and the bigger worry is the sharp rise in prices of pulses, which continue to escalate, with their inflation touching a near three-and-a-half year high of 18.79%. Inflation for spices continues to remain as high as 22.76%.

Eggs and fruit inflation have escalated to 9.3% in October, recording a sharp rise compared to the previous months. The stickiness of food items other than vegetables has not only proven a headache for the central bank’s rate-setting panel but also for the common public ahead of the general elections scheduled next year. Moreover, the prices of some of the food items such as pulses, sugar and cereals are still rising.

While any possible effect from the downward recovery in tomato prices has faded now, a surge in onion prices is spelling trouble now. After tomatoes became the lead villain in inflation going past the 7% mark earlier this year, it’s now the turn of onions. The commodity began witnessing inflation from June, coming off a 21-month deflationary period.