At 5.1%, retail inflation cools to a three-month low in January

Annual retail inflation eased to 5.1% in January 2024, the lowest in three months, from 5.69% in December, matching expectations.

The slowdown is due to favourable base effects from last year as inflation rose in January 2023 and food prices continued to slow. Food inflation fell to 8.3% from 9.5%. Prices rose less for vegetables (27% vs 27.6%), pulses (19.5% vs 20.7%), spices (16.4% vs 19.7%) and fruits (8.7% vs 11.1%) and continued to fall for oils and fats (-15% vs -15%). A slowdown was also seen in prices for pan, tobacco, and intoxicants (3.3 vs 3.7%), clothing and footwear (3.4% vs. 3.6%), miscellaneous (3.8% vs. 4.1%) and housing (3.2% vs 3.6%) while prices for fuel and light fell by 0.6% after a 1% drop.

For Q1FY25, Q2FY25, Q3FY25 and Q4FY25, the inflation reading was pegged at 5 per cent, 4 per cent, 4.6 per cent and 4.7 per cent respectively, assuming a normal monsoon next year, by the RBI.

RBI governor Shaktikanta  Das has often repeated that the central bank is determined to bring down inflation to 4 per cent. Recently, he expanded the scope of his frequently cited 'Arjuna' analogy to convey that it takes into account various factors beyond just inflation when shaping policies, while flagging that headline inflation remains vulnerable to recurring and overlapping shocks due to overseas and domestic factors.