Inflation numbers in July are well below the 8-year high of 7.79%, which was touched in April.
This is the second consecutive month that inflation data has cooled down. In May, the CPI number came down to 7.01%.
However, inflation remains above the Reserve Bank of India’s (RBI) upper tolerance level of 6%. It has remained above this mark for the last 7 months.
The RBI primarily factors retail inflation into factors while arriving at the bi-monthly policy.
The Monetary Policy Committee (MPC) of the Reserve Bank has been tasked by the government to control retail inflation at 4% (+, -2%) based on the Consumer Price Index (CPI).
Government data suggests that the fall in inflation figures is mainly due to moderation in food prices.
Earlier this month, the RBI raised interest rates by 50 basis points to 5.40%, taking it up from where it was before the pandemic, with more rate hikes expected.
RBI Governor Shaktikanta Das has warned that persistently high cost of living could translate into higher wages and inflation, which is unlikely to fall within the top end of the mandated target band by December.
Stating that there are indications that headline inflation, which has breached the 6% upper limit set for the RBI for six consecutive months, is peaking, Das had said the policy move from here was “calibrated, measured and nimble”. Will and will depend on dynamic mobility.
“…inflation still remains at uncomfortably or unacceptably high levels and, therefore, monetary policy has to act,” he told reporters.