September retail inflation cools to 13-month low

Food inflation was 3.88%, down from 5.91% in August; makes room for more rate cut

Consumer Price Index (CPI)-based inflation for the month of September fell to 4.31 per cent, the lowest in 13 months, on the back of a fall in food inflation, especially of pulses and vegetables.

CPI inflation for August was 5.05 per cent; for September last year, 4.41 per cent. The previous lowest retail inflation rate was the month before that, in August 2015, at 3.41 per cent.

Consumer Food Price Inflation for September was 3.88 per cent, down from 5.91 per cent in August. For September last year, it was 3.88 per cent as well, showed data issued by the Central Statistics Office on Thursday.

“The inflation declined majorly due to ease in prices of food and beverages, especially pulses and vegetables. Inflation rates have gone down in all segments, except for fuel and light, and miscellaneous (categories),” said Madan Sabnavis, chief economist with CARE Ratings.

The rise in price for pulses in September was 14 per cent, compared with above 20 per cent in August. Vegetable prices fell seven per cent for the same period.

“We expect CPI inflation to be around five per cent for the rest of the year,” Sabnavis said. He felt inflation in food items might continue to ease, owing to the kharif crop entering the market, though there could be upward pressure for a brief period with a slowdown in the harvesting process in some parts.

On October 4, the Monetary Policy Committee, with new Reserve Bank Governor Urjit Patel at its helm, cut the policy rate by 25 basis points (bps).

“With inflation stabilising in the coming months, we do expect another 25 bps cut in rates in December,” Sabnavis said.