Today's release of CPI data is anticipated, and the CPI for August is expected to be 7.08 percent
Today, September 12, 2023, the Consumer Price Index (CPI) data for August is anticipated to be made public. According to a CNBC-TV18 poll, the CPI for August is expected to be 7.08 percent, which is just under the 7.44 percent number from the prior month. It is still more than the RBI's 6 percent target, though.
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Particularly when compared to the same month last year when it was at 7%, this ongoing inflationary trend is cause for alarm.
The core inflation rate for August is predicted to be 4.8 percent, which is somewhat lower than July's 4.9 percent and down from a year ago when it was 5.9 percent. If this decrease materialises, it would be encouraging because it would indicate a real reduction in inflationary pressures in non-volatile economic sectors.
What is core inflation rate and what does it predict?
The change in prices of goods and services minus food and energy constitutes the core inflation rate. Food and energy costs are particularly volatile; by incorporating these categories, an accurate assessment of the true level of inflation may be distorted.
Consumer Price Index (CPI) Less Food and Energy and core CPI are both equivalent terms for the core inflation rate. Because of this omission, the core inflation rate is a better indicator of underlying inflation trends than the headline inflation rate. Because of its precision, central banks prefer to use it for determining monetary policy.
Regular inflation—the rise in prices for all goods, including food and energy—could undoubtedly affect your daily life by requiring you to tighten your budget, but core inflation is the favored measure of inflation to the central bank.
This means that the Board of Governors of the central bank will probably raise the interest rate if the core inflation rate rises (and stays) too high, which will hike interest rates on credit cards ,mortgages, and other consumer lending products.
Food Inflation to be the major cause of Concern
Food inflation, which is anticipated to stay in double digits at 10%, is a major factor in India's rising CPI. Even while it represents a small improvement over the 11.5 percent observed in July, this is still cause for concern.
The Monetary Policy Committee's (MPC) target of 6 percent must be met, hence the RBI is keenly interested in containing food inflation.
The MPC is anticipated to stick with its current course of action and keep interest rates unchanged until inflation starts to sustainably inch closer to the 4 percent threshold.
However, the RBI might be forced to enact additional tightening measures to stop rising prices if inflation stays above 7%. In order to give the RBI more wiggle room, it is hoped that subsequent CPI readings will trend below the psychologically crucial 7 percent level.
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