Volatile food inflation could very well turn out to be the villain in the central bank’s bid to curtail inflation, according to the latest monthly bulletin from the Reserve Bank of India (RBI) released on June 19.
Inflation targeting remains work in progress as long as food price pressures persists, the Bulletin said.
While the headline inflation gradually easing, driven by sustained easing of core inflation, volatility in food prices interrupt path of disinflation, the RBI bulletin said.
The headline retail inflation eased to the lowest in a year at 4.75 percent in May 2024, data released by the statistics and programme implementation ministry on June 12 showed.
The Consumer Price Index (CPI) inflation in April was at 4.83 percent. The headline rate for last month is the lowest after May 2023 when it came in at 4.31 percent and has now been under the 5 percent-mark for three consecutive months starting March 2024.
Core inflation, which excludes volatile components such as food and fuel, is now at an all-time low of 2.97 percent, reflecting some demand imbalances and gaps in the economy, according to Emkay Global’s lead economist Madhavi Arora. However, the Consumer Price Food Index or CPFI remained almost flat at 8.69 percent versus 8.7 percent a month ago. In its latest policy review, the Reserve Bank of India (RBI) maintained its FY25 inflation projection 4.5 percent but added that food prices could continue to be sticky.