The consumer price inflation (CPI) in Dec 2018 further cooled to an 18-month low of 2.19% yoy compared to 2.33% in Nov'18, bringing in reason to cheer for the economy. The fall in CPI was mainly on the back of lower fuel prices.
The dip also raises the probability that the RBI will not hike rates in its policy review meet due in Feb. However, chances of a rate cut are thin as core inflation still remains elevated at 5.7%
CPI is an indicator for changes in the market price levels of a basket of consumer goods and services. It is a statistical estimate calculated by collecting prices of sample representative items periodically.
Fuel and light prices rose 4.54% yoy
Housing prices rose 5.32% yoy
Clothing and footwear prices increased 3.52% yoy
Food and beverage prices declined 1.49% yoy
CPI has now remained below the target rate of 4% since August for the fifth month in a row, which may be seen as a reason to follow a more dovish approach by the RBI going forward. The RBI had held the policy rate steady in its last meet in Dec'18
Earlier today, data showed that wholesale price inflation fell to an 8-month low of 3.8% yoy in Dec 2018. Read more.