newest retail inflation number Prices point to a slight softening of gains momentum, and this should give policymakers some consolation that recent interventions are working. Inflation, as measured by the Consumer Price Index (CPI), declined 75 basis points to 7.04% in May from a 95-month high of 7.79% in April. While it is hard to quantify the impact that RBI’s astonishing 40 basis points interest rate hike had in early May, the Centre’s May 21 decision to cut excise duty on petrol and diesel by 8 and 6 points respectively , It seems like. had immediate effect. Inflation in the transport and communication category of the CPI declined by 137 basis points to 9.54% last month. This flagship range, with a weight of 8.59, which places it behind only grain and housing, captures the pump prices of main transportation fuels, making it an important indicator of price pressures in the economy. However, a closer look reveals that inflation in the category is gradually accelerating, albeit at a slower pace. Disappointingly, rural consumers, who have comparatively less purchasing power than their urban peers and yet rely heavily on fuel for agricultural operations, reported only 42 basis points in year-on-year growth. experienced a very slow softening of With the price of the Indian basket of crude now up nearly 8.5 per cent from April to a 10-year high this month, and the rupee steadily falling to new record lows against the dollar, it would be unwise to let one’s guard down especially. Given the pass-through effect, transportation costs have an impact on most other prices.
Food prices, the other driver of retail price gains, offered less relief with consumer food price index (CFPI) inflation falling only 34 basis points to 7.97%. Urban consumers experienced an uptick in food prices as urban CFPI inflation rose 11 basis points to 8.2% last month. Nine of the 12 items on the food and beverages sub-index of the CPI also rose sequentially, resulting in month-on-month inflation rising 30 basis points from the April pace. Prices of vegetables and meat and fish rose by 18.3% and 8.23%, respectively, adding to the nutritional uncertainty of low-income households. And even though inflation in edible oils has slowed from April’s pace, there is no room for complacency as price gains in the vital cooking medium were still running at 13.3 per cent, amid the Ukraine war and the disruption in sunflower oil. In view of persistent supply concerns. Import. May’s wholesale price data also offers little comfort, with headline WPI inflation sharply reaching a new high of 15.9%. With the RBI’s consumer confidence survey showing a significant drop in households’ expectations of a year ahead price level, officials should remain laser-focused on the fight to contain inflation.