The CPI inflation for October came in at 7.61 per cent as food prices continued to remain sticky on account of supply-side distortions. The combined food inflation shot past the 11 per cent mark in October.
This is the seventh month in a row for which the retail inflation has remained above the RBI’s upper tolerance level of 6% amid hopes that the arrival of the winter crop in the market along with steps taken by the government to contain onion prices will cool off overall higher food prices.
The RBI could pause in its December policy and wait for another round of inflation print before taking a decision to go for further easing of interest rates which could only happen in February.
“A bumper rabi crop, moderate increases in minimum support prices (MSPs) for kharif crops, a normal monsoon, sizeable buffer stocks and good water storage levels in major reservoirs augur well for the inflation outlook,” the RBI noted in its October policy review.
The central bank expects the retail inflation to trend downwards in the second-half of the fiscal. It estimates the CPI to ease to 5.4% in Q3 and 4.5% in Q4.