Inflation at 6.77% — above RBI band for 10 months in a row

Retail inflation dropped to 6.77 percent in October from 7.41 percent in the preceding month, mainly due to easing prices in the food basket, though it remained above Reserve Bank's comfort level for the 10th month in a row, according to the government data released on Monday.

The Consumer Price Index (CPI) based retail inflation has remained above the 6 percent target since January this year.

As per the latest data released by the National Statistical Office (NSO), the inflation in the food basket was 7.01 percent in October as against 8.6 percent in September.

As the RBI failed to ensure inflation remained at 4 percent with a margin of 2 percent on either side for three consecutive quarters, it has sent a report to the government detailing the reasons for the failure and steps it is taking to bring CPI in the target range.

Aditi Nayar of ICRA said, “We were looking at a 6.7 percent CPI print today. So what's come in is just a little bit higher than expected. Food and some of the other components are in line. But I think miscellaneous has come in about 10 basis points higher than what we were factoring in. So within that, we need to just take a look and see if it's that fear acceleration of the momentum and services inflation, because that's something that could become sticky going ahead. But otherwise, I would say that the overall is pretty much along expected lines.”

Anubhuti Sahay of Standard Chartered Bank said, “The number is slightly higher than our expectation. We were looking at 6.6 percent so it's almost 17 basis points higher. We were expecting much of the deceleration to come from the food front. So I think we will need to wait for the internals if food, primarily to assess whether our food softened as we expected or is there still some bit of stickiness on that. On core excluding transport and communication, we do not expect as of now much change from the previous month. But I think internals would be very interesting to watch out for.”

Another set of data released earlier in the day revealed that the wholesale price index (WPI)-based inflation dipped to a 19-month low of 8.39 percent in October on easing prices of food, fuel, and manufactured items.