Inflation above MPC comfort range for fourth straight month

Published On: Friday, August 14, 2020 | By: Team KnowMyStock

Consumer Price Index (CPI)-based inflation came in above the monetary policy committee’s target band of 4 percent (with a margin of +/-2) for the fourth consecutive month in July. The official data released yesterday(13th August 2020) showed that retail inflation rose to 6.93 percent year-on-year, up from 6.23 percent in June, mainly because of a rise in food and petroleum prices. Consumer Food Price Index-based inflation (CFPI) rose to 9.62 percent in July, compared to 8.72 percent in the previous month. Last week, the Reserve Bank of India’s (RBI’s) monetary policy committee kept key policy rates unchanged, deciding to use the future rate cuts “judiciously to maximize the beneficial effects”. The repo rate currently stands at 4 percent, and the reverse repo rate at 3.35 percent. Retail inflation has breached the RBI’s upper tolerance limit (6 percent) for four consecutive months and seven out of eight months.

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