Alarm bells ring, inflation continues to rise way beyond RBI’s tolerance level

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FEBRUARY 12, 2020

With inflation mounting its head in January, RBI’s decision to keep the interest rates unchanged in the final monetary policy of FY20 gets validated.

In its final bi-monthly monetary policy for FY20, the RBI kept repo rate unchanged at 5.15 per cent and revised inflation projection upward.

The retail inflation inched up to a six-year high in January on account of rising food prices, government data released on Wednesday showed.

The CPI-based retail inflation was recorded at 7.59 per cent up from 7.35 per cent last month. The December inflation figure was the highest since May 2014.

In its final bi-monthly monetary policy for FY20, the RBI kept repo rate unchanged at 5.15 per cent and revised inflation projection upward.

It estimated retail inflation in the range between 5 per cent and 5.4 per cent in the first half of the next fiscal starting April 1, 2020.

According to a Reuters poll of 40 economists, annual consumer price inflation was expected to have surged to 7.40 percent in January.

“The MPC revised the CPI inflation projection upwards to 6.5 per cent for Q4:2019-20; 5.4-5.0 per cent for H1:2020-21; and 3.2 per cent for Q3:2020-21, with risks broadly balanced,” said RBI Governor Shaktikanta Das in the last MPC meet.

The RBI MPC also highlighted that food inflation rose to double digits, primarily caused by a spike in onion prices due to unseasonal rains in October – November 2019.


Courtesy/Source: The Financial Express