Retail inflation in February above RBI’s comfort level


NEW DELHI: Retail inflation eased marginally in February but stayed above the RBI’s comfort level on the back of stubborn food prices, triggering worries about another interest rate hike by the central bank when it reviews monetary policy next.
Data released by the National Statistical Office (NSO) on Monday showed retail inflation, as measured by the Consumer Price Index (CPI), rose an annual 6. 4% in February, a tad slower than the 6. 5% in January but remained above the central bank’s upper tolerance band for the second consecutive month. The food price index was near 6%, similar to the level in January. Rural inflation was at 6. 7%while urban was at 6. 1%.
Cereal inflation continued to be in double digits at 16. 7%, while milk & milk products was at 9. 7%. Spice’s inflation was also in double digits at 20. 2%. Core inflation, which excludes food and fuel, remained at 6%which experts said was “worrisome”.
Vegetable prices remained in deflation territory, contracting 11. 6%.
“The prediction of record wheat and pulses output as per the second advance estimate of foodgrain production is comforting.
However, the likelihood of a heatwave in March ahead of the Rabi harvest adds to the concerns surrounding food inflation.
Further, risks on the food inflation front remain elevated owingto the threat of the El Nino effect on the Kharif crops,” said Rajani Sinha, chief economist at CareEdge.
Inflationary pressures have remained stubborn after showing signs of easing and economists said the RBI may go in for another interest rate hike. “This print reaffirms our view that the RBI is likely to raise rates again in its April policy by 25bps,” HDFC Bank said in a note.


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