"Vegetable prices have entered their seasonal trough and further softening is unlikely. . .There are risks to the central forecast of 8 per cent CPI inflation by January 2015 stemming from a less-than-normal monsoon due to possible El Nino effects," the RBI said in its first bi-monthly monetary policy statement for 2014-15, which left interest rates unchanged.
Wholesale price-based inflation eased to a nine-month low of 4.68 per cent in February, while retail inflation slowed to a 25-month low of 8.1 per cent.
"Excluding food and fuel, however, retail inflation remained sticky at around 8 per cent.
“This suggests that some demand pressures are still at play," it added.
El Nino refers to the warmer-than-average sea surface temperatures in the central and eastern tropical Pacific Ocean.
This condition occurs every four to 12 years and had last hit India's monsoon in 2009, leading to the worst drought in almost four decades.
Other risks to inflation are uncertainty on minimum support prices for agricultural commodities and other administered prices, especially of fuel, fertiliser and electricity, the outlook for fiscal policy, geo-political
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