Retail inflation surges to 8-month high of 4.8% in August

NEW DELHI: Retail inflation based on the consumer price index (CPI) hit an eight-month high of 4.8% (y-o-y) in Aug from 4.5% in July, driven largely by higher food prices, NSO (National Statistics Office) data released Monday showed.At current level it is above RBI's 4% target for the third consecutive month, although it remains within the 2-6% comfort zone. Separately, wholesale price index (WPI) data pegged factory gate inflation at 9.9% in Aug, from 9.8% in July, on the back of higher fuel and manufactured goods prices.NSO data estimated that food inflation accelerated to 6% in Aug, compared to 5.5% in July. The impact of fresh hostilities in West Asia, which has increased oil prices, was seen in sectors, such as transport and restaurants.

Prices in restaurants services accelerated 8.4% in Aug compared to 7.7% in July, while inflation in transport services was at 4.6% against 4.4%.

Factory gate inflation rises faster

Retail inflation remained stronger in rural India (5.2%), up from 4.8% in July. Urban inflation, too, witnessed a rise to 4.3% from 4%. The latest retail inflation data assumes significance as RBI's monetary policy committee (MPC) is due to meet early next month."The inflation outlook remains vulnerable to both external and weather-related risks.

Uncertainty surrounding transit through the Strait of Hormuz continues to pose upside risks to global energy prices. Domestically, below-normal rainfall remains a key concern... A sustained uptick in inflation could strengthen the case for a rate hike in the coming months. The Oct RBI policy decision will be crucial to watch, especially as some major central banks have already embarked on a rate-hiking cycle," said Rajni Sinha, chief economist at CareEdge.ICRA chief economist Aditi Nayar earlier expected a rate hike in Dec. "If crude prices remain elevated in the run up to the upcoming MPC meeting, hinting at an impending upward revision in the Retail Selling Prices (RSP) of petrol and diesel, which could percolate into generalised price pressures, then the expected rate hike could get pre-poned to Oct 2026 from Dec 2026."