When food inflation became main course on MPC menu

livemint.com:

Concerns that volatile food prices could hurt the battle against inflation dominated the latest meeting of the central bank's rate-setting committee, minutes released on Friday showed, compelling the panel to hold the policy rate. While headline inflation measured by the consumer price index (CPI) cooled a bit from 5.1% in January to 5.09% in February, food inflation rose from 7.58% in January to 7.76%. Food inflation rose primarily driven by vegetables, eggs, meat and fish, the Reserve Bank of India’s (RBI) monetary policy committee (MPC) said.

March inflation numbers, released a week after the MPC meeting, showed that headline inflation further cooled to 4.85%, while food inflation remained sticky at 7.68%. “Overlapping food price shocks, apart from imparting volatility to headline inflation, may also result in spillovers to core inflation," RBI governor Shaktikanta Das said, according to the minutes of the six-member committee's meeting on 3-5 April. Retail inflation has stayed within RBI’s flexible inflation target of 2-6% for the seventh consecutive month.

The RBI has, however, reiterated the inflation target is 4% and the central bank would look for durable signs of deceleration in inflation. “This success in the disinflation process should not distract us from the vulnerability of the inflation trajectory to the frequent incidences of supply side shocks, especially to food inflation due to adverse weather events and other factors," said Das. According to Das, lingering geo-political tensions and their impact on commodity prices and supply chains also add to uncertainties in the inflation trajectory.