Retail inflation spikes to 7.35% in December, highest in over 5 years

The big news Retail inflation rose in December to highest since July 2014 and 9 other top stories

As per the data released by National Statistical Office (NSO) on Monday, the spike in inflation in the vegetable segment was 60.5 per cent during the month compared to December 2018.

Inflation rose swiftly in December primarily on account of higher food prices. In December, onion prices witnessed a huge jump, rising to over 328 percent from around 146 percent in the month ago period.

The inflation based on the Consumer Price Index (CPI) was 5.54 per cent in the month of November and 2.11 per cent in December 2018.

Inflation was pushed up by a rise in food prices and telecom tariffs.

Retail inflation based on consumer price index (CPI) accelerated to 7.35 per cent in December a year ago as against 5.54 per cent in November mainly on account of rising vegetable prices, government data showed on Monday. This is the first time since July 2016, when the the central bank's monetary policy committee (MPC) changed its stance and undertook an inflation targeting approach that the target has been breached. "While there is some sort of increase in other food prices as well, we don't see that to be extremely alarming", Aastha Gudwani, India economist at BofA Global Research told news agency Reuters. A rate increase is typically expected to curb inflation when prices are on the rise.

The RBI is responsible for framing India's monetary policy, and sets interest rates to keep inflation in control while pushing for growth. "Even so, our estimates suggest inflation will likely remain above 6.5% in 4QFY20 and could constrain a rate cut in February", financial services firm Edelweiss said in a statement.

"The headline CPI number of 7.35% y/y in December 19 was slightly above our expectation in the vicinity of 7%, owing to higher inflation in food and transport & communication".

"The path of CPI in the March quarter would be defined by the extent of unwind in vegetable (primarily onion) prices, but rising price of pulses needs to watched too".

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