Retail inflation eases to 5.3% in August

NEW DELHI: Retail inflation based on consumer price index (CPI) for the month of August eased to 5.3 per cent as against 5.59 per cent in July, data released by government showed on Monday.
The inflation numbers stayed within the Reserve Bank of India’s (RBI) comfort zone for the second straight month.
In July, the inflation figure had eased after holding above 6 per cent for two months in a row, helped by improving supplies following the lifting of pandemic restrictions.
In the minutes of the latest monetary policy committee (MPC) meeting, the RBI had noted that India needs to continue monetary policy support for the economy while remaining watchful of inflationary pressures.
The MPC had cut its key rates by 115 basis points to revive growth since March last year and the RBI flushed the market with liquidity through conventional and unconventional tools since April last year along with other global central banks.
The RBI mainly factors in the retail inflation while arriving at its bi-monthly monetary policy.
Food prices eased
The inflation figure eased mainly due to fall in food prices.
As per the data released by the National Statistical Office (NSO), inflation in the food basket was 3.11 per cent in August compared to 3.96 per cent in the preceding month.
What RBI governor said
RBI governor Shaktikanta Das had said that the Central Bank is focused on growth during the pandemic.
The RBI has decided to operate on a 2 per cent – 6 per cent inflation band, instead of fixing the retail inflation target at 4 per cent.
“We are watchful, we are very serious about anchoring inflation expectations and anchoring the inflation around the target of 4 per cent going forward and we remain committed to anchor that, to achieve that over a period of time in a very non-disruptive manner,” Das said.
“Going forward, our effort being an inflation-targeting institution, will be to gradually move to 4 per cent (inflation) over a period of time. That timing has to be decided, today is not the time and we will take a call depending on the incoming numbers,” he said.
US to announce inflation data tomorrow
The US consumer price data is due to be released on Tuesday, which will give a broad picture of the economy’s progress ahead of the Federal Reserve’s meeting next week.
The inflation number remained at a 13-year high on a yearly basis in July, showing signs that it has peaked as supply chain disruptions caused by the pandemic impacted the economy.
The US Federal Reserve is paying close attention to price pressures as it mulls when to begin to reduce its massive bond holdings and how soon to begin lifting rates from near zero. It also remains on the lookout for any signs that price pressures may broaden.

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