Consumer inflation eases to three-month low of 5.10% in January

Retail inflation in the country, gauged by the Consumer Price Index, stood at 5.10 per cent in January, the lowest level recorded in three months, data released on Monday showed. Easing prices of select food items soothed the overall retail inflation reading. In December, retail inflation had stood at a four-month high of 5.69 per cent. 

The latest data on consumer inflation, or the rate of increase in the prices the consumer pays for select goods and services, comes days after the Reserve Bank of India (RBI) maintained the repo rate at the existing 6.5 per cent and continued with its "withdrawal of accommodation" stance of policy.

Economists now expect the central bank to wait before reducing the benchmark interest rates as inflation remains above its medium-term target of 4.0 per cent.

Food inflation, which accounts for nearly half of the overall consumer price basket, came in at 8.30 per cent in January as against 9.53 per cent the previous month. Food price shocks have been the main driver of inflation in the past year, due to climate vagaries and supply shocks due to geopolitical tensions.

The RBI forecasts retail inflation at an average of 5.4 per cent in the current financial year, and at 4.5 per cent in the next financial year.

Here's what economists make of the latest consumer inflation reading: 

Madhavi Arora, Lead Economist, Emkay Global Financial Services: 

"The mild upside surprise on CPI inflation has come on the back of higher-than-expected food inflation, led by higher sequential momentum in eggs, meat andfish and pulses, while cereals remained under pressure despite rising materially in 2023. Vegetable inflation has also remained elevated with sequential contraction being less than the usual seasonal behaviour." 

Factors like delayed sowing amid patchy monsoons and consequent delayed kharif harvest have been impeding a higher correction in their prices. The truckers' strike earlier in the month may have also contributed to the disruption to supply of fruits and vegetables. Nonetheless, core disinflation has continue, with core inflation ex-intoxicants printing the lowest print in nearly four years.  

"We expect inflation to average around 5.0 per cent in the March quarter, in line with the revised forecast of the RBI, and see core CPI inflation at around 3.45 per cent." 

(This story will be updated shortly)

With inputs from agencies