As consumer inflation eases to four-month low, here is what experts say

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Retail inflation is in the RBI's comfort level of 2-6 per cent but above the ideal 4 per cent scenario. | Image: Pexels

Retail inflation in India continued to ease through October, supported by a relative decline in some of the sub-indexes. The October consumer price index (CPI) came at a four-month low of 4.87 per cent against 5.02 per cent the previous month, official data showed.

The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation.

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Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Meanwhile, wholesale inflation in India based on the Wholesale Price Index continued to stay in the negative zone for the sixth straight month through September. Data for October is due to be released anytime this week.

Here are some of the excerpts of views from analysts and experts on the October retail inflation numbers:

Mohit Ralhan, CEO, TIW Capital:

CPI has continued on a downward trajectory for the third straight month. Core inflation has also trended down during this period. This lays the ground for RBI to remain on pause at its upcoming meetings. The central bank, though, will remain vigilant for any food or fuel price shocks.

Rajani Sinha, Chief Economist, CareEdge:

"While this declining trend is comforting, it remains to be seen if it sustains, given the weak prospects for the Kharif harvest and the expected hit to Rabi sowing amid lower reservoir levels in major agricultural states. The first advanced estimate of Kharif crop production paints a grim picture for cereals and pulses output - categories witnessing sticky double-digit inflation. This poses an upside risk to the overall inflation outlook.risks tilted to the upside, the RBI is expected to maintain a hawkish policy tone in the upcoming monetary policy meeting."

Vivek Rathi, Director Research, Knight Frank India:

"This decrease (in inflation) aligns with the Reserve Bank of India's (RBI) target range of +/-4 per cent, indicating the effectiveness of the decision to prioritise economic growth while maintaining a pause on monetary policy actions, particularly regarding interest rate hikes after February 2023."

"The stability in interest rates has played a crucial role in bolstering both consumer and business confidence within the country, especially in the face of challenging geopolitical circumstances and a decelerating global economic environment. Despite these headwinds, the housing market in the country continues to outperform its global counterparts, and the persistence of stable interest rates is expected to further stimulate demand in the housing sector."

Dharmakirti Joshi, Chief Economist, CRISIL:

"For the December quarter, we expect some softening in food inflation with the kharif harvest entering the market, aided by government intervention. Oil prices remain an unknown which could play spoilsport if the Middle East conflict escalates."

"We expect the Reserve Bank of India to remain vigilant since headline inflation remains above the Monetary Policy Committee's (MPC) 4 per cent target and risks to food and fuel persist. Our base case for this fiscal is an average inflation of 5.5 per cent and the MPC maintaining the policy rate and stance."

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