Retail inflation inches up to 2.1% in August

New Delhi: Retail inflation inched up in Aug, led by some hardening in prices of meat and fish, oils and fats, personal care & effects and eggs, but remained in the comfort zone which may prompt RBI to maintain a pause on interest rates for now.

Data released by the National Statistics Office (NSO) on Friday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 2.1% in Aug, up from 1.6% in July but below the 3.7% in Aug last year. There is an increase of 46 basis points in inflation in Aug, compared to July, while food inflation during the month was up by 107 basis points compared to July.

Rural inflation was at 1.7% during Aug, a tad higher than the 1.2% in July while urban inflation was higher at 2.5%, up from 2.1% in the previous month.

Oils and fats increased at 21.2% during Aug while fruits rose 11.7%. Personal care and effects remained in double digits at 16.6%. Pulses and products contracted 14.5% and vegetables fell 15.9% during the month.

"Food's exit from deflation (0% vs -0.8%) and an uptick in core inflation (4.2% vs 4.1%) pulled up the consumer price index (CPI)-based inflation to 2.1% in Aug," said D K Joshi, chief economist at ratings agency Crisil.

"Given the lower-than-expected food inflation and the expected easing of core inflation in the coming months due to the reduction in the goods and services tax, we have revised our inflation forecast down to 3.2% from 3.5% for this fiscal," said Joshi. Experts expect RBI to maintain its pause on interest rates.