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The inflation data for July showed that the Consumer Price Index (CPI) has moved up by 4.17 per cent year-on-year (YoY) versus July 2017. This is lower than the 4.92 per cent YoY change for June 2018. If inflation is moderating, there are good chances that the RBI will not hike rates in its next policy review. That’s good for the financial sector, and for businesses that are capital-intensive.
However, the ‘headline’ overall number is deceptively low. Food is a key component of the CPI basket, with a weight of around 45 per cent. Food inflation is down, to 1.7 per
