The annual retail inflation rate in India eased to 6.44% in February due to a decline in the price of some food items. However, it remained above the central bank's targets. This reinforces the expectations of a further interest rate hike at the central bank's upcoming meeting in next month, Reuters reported.
On Monday, the National Statistics Office released data which showed that the February reading of inflation in India was higher than the 6.35% forecast by economists in a Reuters poll. The reading was also above the upper band of the Reserve Bank of India's (RBI) 2%–6% target, says the report.
Food prices, which account for nearly 40% of the CPI basket, rose 5.95% in February, compared with 6.0% in January, as edible oil and vegetable prices eased.
Economists said food inflation could remain high for the next few months, with El Nino conditions predicted in 2023, while sticky core inflation, excluding volatile food and energy prices, provided little room to absorb higher food prices.
On the other hand, Indian consumers have not benefited much from a fall in international crude oil prices as the state-run oil companies have kept retail petrol and diesel prices on hold to partly recover their earlier losses. Fuel retail prices rose 9.90% year-on-year in February from 10.84% in the previous month, the data showed.
Excluding the volatile food and energy components, core inflation rose between 6.05% and 6.12% last month, according to three economists' estimates, compared with between 6.09% and 6.10% in January, the report added.
Since May last year, the RBI has increased its benchmark repo rate by 250 basis points (bps). The Monetary Policy Committee of the RBI is scheduled to meet from April 3–6.
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