RBI Cautions On Food Price Volatility Despite Sub-Target Inflation In August

New Delhi, Sep 21 (KNN) Reserve Bank of India (RBI) officials, led by Deputy Governor Michael D. Patra, have warned that food price volatility remains a potential risk, even as Consumer Price Index (CPI) inflation remained below the central bank's target for the second consecutive month in August.

This assessment was published in the September edition of the RBI Bulletin released on Friday.

In an article titled 'State of the Economy', the officials noted that food inflation (year-on-year) increased slightly to 5.3 per cent in August from 5.1 per cent in July.

This rise was attributed to an unfavourable base effect of 52 basis points, which outweighed a negative momentum of 30 basis points.

The article highlighted that high-frequency food price data for September (up to the 18th) indicated a moderation in cereal prices, particularly rice, and most pulses, with the exception of gram.

Among vegetables, potato and tomato prices decreased, while onion prices increased. Edible oil prices remained stable.

Examining August data subgroups, inflation increased in eggs, fruits, vegetables, and non-alcoholic beverages, while it eased for cereals, meat and fish, pulses, and sugar.

Edible oils and fats experienced a lower rate of deflation, while spice deflation deepened. Milk prices maintained a modest inflation rate of 3 per cent for the third consecutive month.

The fuel and light category recorded a deflation of 5.3 per cent in August, primarily due to a 24.6 per cent year-on-year decline in LPG prices. However, other items in the fuel group registered positive inflation.

Headline inflation marginally increased to 3.7 per cent in August from 3.6 per cent in July, which the officials attributed entirely to an unfavourable base effect of about 5 basis points, as the index remained unchanged from the previous month.

Core inflation, which excludes food and fuel, moderated to 3.3 per cent in August from 3.4 per cent in July. Inflation increased in transport and communication, education, recreation and amusement, and household goods and services, while remaining steady in clothing and footwear, housing, and health.

Personal care and effects, along with pan, tobacco, and intoxicants, saw a moderation in inflation.

The regional distribution showed rural inflation at 4.2 per cent, higher than urban inflation at 3.1 per cent. The majority of states registered inflation below 6 per cent.

This comprehensive analysis by RBI officials underscores the complex nature of India's inflationary trends and the ongoing need for vigilant monetary policy management.

(KNN Bureau)