Retail inflation spike to 6.95% in March due to high food, oil prices
Retail inflation galloped to 6.95 per cent in March from 6.07 per cent in the previous month on the back of the hardening of food prices.
This is the third month in a row in which the inflation determined by the consumer price index has reached above the RBI's upper end of the tolerance band.
Food inflation increased to 7.68% in March, up from 5.85% in February.
In its most recent monetary policy review, the RBI revised its inflation forecast to 5.7 percent from 4.5 percent previously, owing to the global hardening of oil and commodity prices.
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The RBI, which had previously focused on growth, has now turned its attention to inflation and withdrawal of its accommodative stance.
According to a Reuters poll, the March inflation trend is estimated to be 6.35 percent due to higher food prices. Meanwhile, the report indicates that the entire impact of the increase in fuel prices will be shown in the April inflation print.
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The full impact of the Russia-Ukraine war that began in late February is not expected to be reflected in consumer prices until April, as the pass-through to consumers at gas pumps was delayed.
Food prices, which account for roughly half of the inflation basket, are also projected to stay high as supply problems due to the Russia-Ukraine war impact global grain production, edible oil supplies, and fertiliser exports.
Palm oil, the world's most extensively used vegetable oil, has seen an almost 50% increase in price this year. Food price hikes are being felt severely by millions of people living below the poverty line, who have already suffered job and income losses as a result of the pandemic.
Furthermore, unlike major central banks that are dealing with multi-decade high inflation rates, the RBI has chosen to keep interest rates unchanged even while inflation has climbed well above its target and shows little indications of abating anytime soon.
At Friday's bi-monthly monetary policy meeting, the RBI maintained its key repo rate at a historic low of 4%. However, many are beginning to worry that the right time to begin raising interest rates has already passed.
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-PTC News
