Inflation at 7-month high on higher food, fuel prices

Retail Inflation touches 7-month high of 3.58% in October

Retail Inflation touches 7-month high of 3.58% in October

Retail inflation inched up to a seven-month high in October on the back of higher food, fuel and housing prices, dashing hopes of any cut in interest rates by RBI for now.

The growth in the Consumer Food Price Index - an indicator for food prices - also recovered in October, to 1.90%, after it had slowed to 1.25% in September.

Data further showed that retail inflation in eggs, vegetables, pulses and spices were -0.69%, 7.47%, -23.13% and -2.15%, respectively. Crucial services such as education, healthcare, personal care, etc have seen an inflation of 3.48 per cent.

The price rise in services appear to have been impacted by the implementation of GST as most services are taxed at 18 per cent compared to 14.5 per cent under the previous service tax regime.

"Housing inflation rose to a 40-month high 6.7 per cent in October 2017, reflecting the staggered impact of the revision in the HRA for Central Government employees on the housing index".

The Reserve Bank of India continued to fear that rising consumer prices will threaten the central bank's inflation target of 4% which led the monetary policy committee (MPC) vote for status quo in the October 2017 policy. Crude prices have rallied, sending Brent crude to its highest since June 2015, a worry given that India imports most of its energy needs. Economists said they expect the RBI to hold rates. June was the first month the inflation fell outside the band since inflation targeting was first adopted by India.

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