Rise in global commodities a threat even as easing local vegetable prices cool inflation: RBI bulletin
On a positive note, economists from the Reserve Bank expect the slowing of inflation, largely driven by the correction in vegetable prices from the July peak, to continue in September as well. “The correction is not complete, and more is expected to drive down retail inflation in its September reading,” RBI economists wrote in the report. “Furthermore, there are early indications of corrections in a broad range of vegetable prices going beyond the tomato, onion and potato group,” the report said. The views, though, are not of the RBI.
A new risk to global financial stability stems from the commodity markets, with crude oil prices at 10-month highs due to Saudi Arabia and Russia extending voluntary production cuts to the end of 2023. The strength of the US dollar on safe haven demand is also making crude prices higher. A 10% rise in crude prices is estimated to impact consumer price inflation by 0.25 percentage points, according to market analysts.
The central bank economists have acknowledged that core inflation is stabilising as reflected in a broad-based easing of price pressures across its constituents, both goods and services. Even the increase in rural and urban consumer price indexes has eased. This is an important development in the conduct of monetary policy, they said.
The headline CPI inflation moderated to 6.8% in August from 7.4% in July.
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