In the penultimate month of FY21, CPI inflation jumped up to 5.03% from a 16-month low of 4.06% in Jan-21, attributable to an adverse base along with a mild sequential pick up in prices in a 80:20 ratio.
Download ReportIndia Feb 21 - CPI: Moving parts a bit too many
In the penultimate month of FY21, CPI inflation jumped up to 5.03% from a 16-month low of 4.06% in Jan-21, attributable to an adverse base along with a mild sequential pick up in prices in a 80:20 ratio. The print was in line with market expectations but surprised us on the downside. The rise notwithstanding, Feb-20 marks the third consecutive month of headline inflation remaining well within RBI’s inflation target band of 2-6%.
Drawing from Feb-21 data, we answer six questions on inflation mechanics amidst several moving components and their implication on FY22 trajectory, conduct of monetary policy and the upcoming review of the inflation targeting framework –
- Can food prices become a point of concern?
- Is a cut in excise on fuel probable to offer inflation relief?
- Has inflation troughed out?
- Why we need to keep an eye on core inflation?
- Why should the inflation target be retained?
- Finally, what are the implications for conduct of monetary policy?