Retail inflation expected to be highest in 14 months! Projected to cross 6% in October

New Delhi| Retail inflation may once again move out of the RBI’s slate to cross 6 per cent in October, 2024, due to continued food price hikes and the elimination of high base effect. If this happens, it will not only spoil the budget of the common man’s household, but the possibilities of recent cut in repo rate will also be tarnished.

The latest report of Union Bank of India claims that Consumer Price Index (CPI) inflation will increase to the level of 6.15 percent in October. This would be its 14-month high after August, 2023. Retail inflation at the time stood at 6.83 per cent, while rising to a 15-month high of 7.44 per cent in July, 2023.

Retail inflation had also risen to a 9-month high of 5.49 per cent in September, compared to 3.65 per cent in August, due to the rise in food prices. During this period, the inflation rate of food items had also increased from 5.66 percent in August to 9.24 percent in September.

According to the report, after September, there has been a rise in the prices of food items in October also. The main reasons for this are vegetables and edible oils. Food prices still remain a challenge for policy makers in the country, who want to bring down retail inflation to four per cent permanently.

Inflation remains at risk due to factors such as disruption of food supplies (if any), imported price pressure on edible oils and the impact of trade tariff increases in the Donald Trump-led government. There is a need to keep a close eye on these.

The report said that all eyes will be on the progress of harvesting and sowing of Rabi crop in the Kharif season. If everything goes well, food inflation is expected to come down by the last quarter of the current financial year i.e. January-March.

RBI has also expressed concern about inflation in the last meeting of the Monetary Policy Committee (MPC) in October. RBI Governor Shaktikanta Das has also recently indicated that retail inflation will increase further in October. Also, it was clearly said that in the MPC meeting to be held in the first week of December, there will be no cut in the repo rate as it has been for two years. The Union Bank report indicated a cycle of 50 basis points cuts in the repo rate starting in February, 2025.

According to a recent report by CRISIL, tomato prices in October have increased by 120.68 per cent to Rs 64 per kg from Rs 29 in the same period a year ago. The arrival of tomatoes has been affected due to rain. Onion prices have risen 46 percent on an annual basis. Potato prices have registered a rise of 51 per cent.