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As retail inflation falls to 9 month low, RBI may hold rates

KR Market Bangalore

Due to decline in prices of food and beverages retail inflation was at 9 months low in July. Inflation based on CPI stood at 4.17% in July from 4.92% in June. Food price inflation was at 1.37% in July from 2.91% in June.

CPI measures the weighted average of prices of a basket of consumer goods and services. While Core CPI is CPI excluding energy and food prices. Both retail price index and consumer price index measure inflation. They evaluate the changes in prices of a basket of products. However they cover different items.

Core consumer price inflation was at 6.2% in July from 6.3% in June. Fuel and light inflation stood at 7.96% in July from 7.14% the previous month. While clothing and footwear was at 5.28% from 5.67% in June.

The RBI may hold interest rates in the October policy meeting. In its earlier policy meeting in August the RBI raised repo rates by 25 basis points.

IMF Report

In its annual report on India, IMF cited average inflation to increase to 5.2% for the fiscal year 2018-19 from 3.6% in the previous fiscal. IMF expects the RBI to tighten monetary policy to control inflation.

The next policy decision to be announced on October 5.

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