Retail inflation rises to 5.21%, dashes rate cut hopes

Inflation for the food basket increased to 4.96 per cent in December from 4.42 per cent in the preceding month.

Retail inflation crossed the RBI's comfort level and rose to 5.21 per cent in December on rise in prices of food items, egg and vegetables, dashing hopes of interest rate cut in the near future.

The retail inflation, based on Consumer Price Index (CPI), was 4.88 per cent in November.

In December 2015, it was 3.41 per cent.

The Reserve Bank has been asked by the government to keep inflation at 4 per cent, plus or minus 2 per cent, and its rise beyond the comfort zone will put pressure on the central bank not to cut interest rate (repo rate).

As per the data released by the Central Statistics Office (CSO), inflation for the food basket increased to 4.96 per cent in December from 4.42 per cent in the preceding month.

The data revealed that eggs, vegetables and fruits became costlier, while inflation moderated in case of cereals and pulses.

Photograph: Shailesh Andrade/Reuters