RETAIL INFLATION AT 3-MONTH LOW OF 5.1% IN JAN AS FOOD PRICES EASE

Retail inflation rate touched a three-month low of 5.10% in January as prices of some food items rose more slowly, data showed on Monday, although the central bank is expected to wait before cutting rates as inflation remains above its target rate.

Annual retail inflation eased in January from 5.69% in December, government data showed, and was in line with a 5.09% forecast by a Reuters poll of 44 economists.

Last week, Reserve Bank of India (RBI) left interest rates unchanged, signalling that cuts may be some time away as it focuses on getting inflation to 4% on a sustainable basis.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.30% in January, compared with a 9.53% rise in December.

Prices of cereals rose 7.83% year-on-year in January compared to 9.93% in the previous month, while vegetable prices rose 27.03% compared to 27.64% in December, the data showed.

“CPI inflation came in slightly softer than our expectations,” said Upasna Bhardwaj, chief economist at Mumbai-based Kotak Mahindra Bank.

But uncertainties about food inflation are likely to keep the central bank “cautious in the near term”, she said.

The central bank forecasts retail inflation at an average of 5.4% in the current fiscal year ending in March, and at 4.5% for the next fiscal year.

Core inflation, which strips out volatile food and energy prices, is estimated at 3.6% in January, compared with 3.8%-3.89% in December, according to two economists.

“Housing inflation remains weaker than expected, despite strong urban demand,” said Gaura Sen Gupta, economist at IDFC First Bank.

The government does not release core inflation figures. Core inflation has fallen despite strong growth in the economy.