Retail inflation falls, WPI at 9-month high

Retail inflation slowed to a three-month low at 6.93% in November as vegetable prices eased, data released by the statistics department on Monday showed. However, RBI is unlikely to cut interest rates anytime soon as inflation still remains well above the upper limit of its tolerance level of 6%. In November, food inflation eased to 9.43% from 11% a month ago, with the vegetable price index softening to 15.6% from 22.5% in October. However, inflation for protein-based items such as meat and fish (16.7%), egg (20.3%) and pulses (17.9%) remained high.

Separately, data released by the industry department on Monday showed wholesale price inflation inching to a nine-month high at 1.55% in November as inflation for manufactured items accelerated.

“The headline retail inflation for November printed appreciably lower than our expectations, benefiting from stable vegetable prices at the retail level. While this provides welcome relief, it is unlikely to prove adequate for any imminent rate easing,” said Aditi Nayar, principal economist at ICRA Ltd.

RBI, in its latest monetary policy review earlier this month, kept its policy rate unchanged at 4% but signalled it would keep its policy accommodative to support growth. It, however, raised its inflation forecast to 6.8% in Q3, 5.8% in the fourth and 4.6-5.2% in the first half of next fiscal. RBI has cautioned that the inflation outlook has turned adverse relative to expectations in the past two months. “The substantial wedge between wholesale and retail inflation points to supply-side bottlenecks and large margins being charged to consumers. While cereal prices may continue to soften with the bumper kharif harvest arrivals and vegetable prices may ease with the winter crop, other food prices are likely to persist at elevated levels. Crude oil prices have picked up on optimism of demand recovery, a continuation of Opec+ production cuts and are expected to remain volatile in the near-term,” it added.