InvestorQ : What is the implication of the 6.69% CPI inflation that was announced out yesterday?
Juvina Maggie made post

What is the implication of the 6.69% CPI inflation that was announced out yesterday?

Answer
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diksha shah answered.
2 weeks ago


CPI inflation or retail inflation, as it is better known, eased marginally to the level of 6.69% for August 2020. The other positive news was that the inflation for July also gets revised lower by 20 basis points from 6.93% to 6.73%.

Of course, the bane continues to be food inflation, which continued to remain above the 9% mark. Eggs, oils, fats, pulses, fish and vegetables continued to see high inflation. Food inflation rising despite a good Kharif is indicative of supply chain pressures on inflation.

However, the bigger concern will be the core inflation which has risen sharply to 5.77%. Core inflation excludes food and fuel inflation and is normally indicative of the direction of headline inflation. Core inflation has kept headline inflation above RBI comfort level of 4%.

This has raised questions over the RBI cutting rates during this calendar year. While any rate cut in October looks highly unlikely, with the latest inflation data, even rate cuts in December are beginning to look very unlikely as real rates are already in the negative.