December 2019 from 5.54% a month ago, as per the Ministry of Statistics & Programme Implementation data. As per the government data published on Monday, the food inflation was up to 14.12% in December as against (-) 2.65% in the same month of 2018. It was 10.01% in November 2019. The Consumer Price Inflation (CPI) or retail inflation figures, released by the National Statistical Office (NSO), indicated that inflation has further jumped from November when it hit a 40-month high of 5.54%. The retail inflation based on Consumer Price Index (CPI) was 2.11% in December 2018. Further, food inflation at 14.12% and vegetable inflation at 60.5%, while core inflation stood at 3.7% and household goods and services grew by 1.75% from 2.2% in November. Aditi Nayar, Principal Economist, ICRA Ltd, “the CPI inflation in December 2019 overshot both our projection of 6.7% as well as the upper threshold of the MPC's band of 2-6% by a substantial margin, driven by the double-digit surge in the food inflation. While vegetable prices led the spike in food inflation, prices of other food items, especially proteins, hardened appreciably as well. In particular, prices of pulses may remain elevated in the coming months, despite the favourable outlook for the rabi crop. Stickiness in prices of protein items may provide a floor to food inflation going forward, even once vegetable prices correct to seasonally appropriate levels.” “The increase in the core CPI inflation was more modest than what we had feared in light of the revision in telecom tariffs. Nevertheless, the revision in rail fares, uptick in prices of some categories of automobiles as well as an unfavourable base effect, may contribute to a further uptick in the core inflation to around 4.0% in the ongoing month. Even though we expect the headline CPI inflation to correct sharply in January 2020 and further in February 2020, from the unpalatably high 7.35% recorded in December 2019, it is expected to remain sticky above 4.3% in the next few quarters. Moreover, the concerns surrounding a higher core inflation trajectory are likely to be adequate for the MPC to remain on hold in its February 2020 policy review, along with a possible change in stance from accommodative to neutral. With an extended pause likely from the MPC over its next few meetings, the magnitude of further Twist OMOs and the market's expectations of the fiscal picture to be revealed in the upcoming Union Budget will dominate the trend in bond yields in the rest of this month,” Aditi Nayar added. |
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