RETAIL INFLATION AT 7MONTH HIGH DRIVEN BY FOOD AND FUEL PRICES

NEWDELHI: Retail inflation quickened to 3.58% in October, the fastest pace in seven months, spurred by rising food and fuel prices, virtually ruling out the possibility of an interest rate cut by the Reserve Bank of India in its 6 December monetary policy review.

Measured by the Consumer Price Index of CPI, retail inflation rose by 3.28% in September.

Combined food inflation in October was 1.9% in October, compared with 1.25% a month ago as vegetable prices increased by 7.47% from 3.92% in the previous month.

Prices of milk and egg increased modestly and fruit and fish prices came down marginally.

Data released by Central Statistics Office showed that inflation in urban India, at 3.81%, was higher than that in rural India, at 3.36%.

There is little likelihood of rate cuts in the immediate future, with the CPI inflation expected to track a rising trend in the second half of the financial year and print at around 4.5% in March 2018, analysts said.

To be sure, the GST Council’s decision on Friday to cut the tax rate on 177 items from 28% to 18%, leaving only 50 items under the highest tax slab, is expected to partially ease inflationary pressure on consumers as and when companies start passing on the benefits by cutting prices.

“We continue to expect an extended pause amid non- unanimous voting by the MPC (Monetary Policy Committee) in the December 2017 policy review,” said Aditi Nayar, principal economist at rating company ICRA Ltd. Calls for RBI to lower rates had become louder after economic growth decelerated to 5.7% in the quarter ended June, the slowest pace in three years.

The M PC in August cut its key policy rate by 25 basis points to 6%, the lowest since November 2010. The panel left rates unchanged in its October review. A basis point is a hundredth of a percentage point.