Retail Inflation Will Come Down to Below 4% Only After December, Says SBI report

According to government data, the retail inflation rose to 6.93 per cent in July, mainly driven by rising prices of food items like vegetables, pulses, meat and fish. It was 3.15 per cent in the corresponding month last year.

“We expect August inflation numbers to be elevated at around 7 per cent or even higher and if the base effect is the primary reason, inflation could only come down to below 4 per cent possibly beyond December,” the SBI report said. However, the report further said that it looks difficult to believe that supply disruptions would normalise against the huge upsurge in pandemic in rural areas and this now poses an upside risk to inflation numbers.

“We are thus less hopeful of any rate cut in current fiscal/at best 25 bps as February MPC meeting would consider December inflation only,” it said.

The Reserve Bank of India, which mainly factors in retail inflation while arriving at its monetary policy, had kept the short-term lending rate unchanged to help tame inflation last month.