Retail inflation falls to one year low of 5.72% in December

Retail inflation declined to a one-year low of 5.72 per cent in December 2022 mainly due to cooling vegetable prices, according to official data released on Thursday.

The Consumer Price Index (CPI) remaining below 6 per cent for the second month in a row has provided some room to the Reserve Bank to pause interest rate hike which has been going on since May last year.

The RBI has been asked by the central government to ensure inflation remains within 6 per cent.

The CPI-based retail inflation was at 5.88 per cent in November 2022 and the previous low was 5.66 per cent in December 2021.

Retail inflation is on a downward trajectory since October.

As per the data released by the National Statistical Office (NSO) on Thursday, inflation in the food basket was at 4.19 per cent in December as against 4.67 per cent in November and 4.05 per cent in December 2021.

In the vegetable basket, it dropped by over 15 per cent on annual basis.

The prices of fruits too showed a modest rise of 2 per cent in December 2022.

The rate of price rise was also negligible in 'oils and fats' and 'sugar and confectionery'.

However, spices became dearer by nearly 20 per cent and cereals by about 14 per cent.

The index of 'fuel and light' was up by about 11 per cent on annual basis in December.

As per the flexible inflation targeting (FIT) regime, the RBI has to ensure the retail inflation (CPI) at 4 per cent with a margin of 2 per cent on either side.

The RBI had to submit a report to the central government as it failed to keep the inflation below the upper tolerance band of 6 per cent for three consecutive quarters since January 2021.

The next meeting of the RBI Governor-headed Monetary Policy Committee (MPC) which decides on policy rates is scheduled for February 6-8.

The central bank has raised the short-term lending rate by 2.25 percentage points in five tranches since May 2022 to tame the high inflation amid the geopolitical situation and resulting disruption in the global supply chain.

The government too in part has taken several measures, like curbs on exports of certain commodities, to check prices in the domestic market.