Retail inflation hits 3-month high in January

Retail inflation in India again breached  RBI 's upper tolerance band in the month of January 2023, with the  Consumer Price Index  pegged at 6.52 per cent, government data released on Monday showed.The retail inflation in rural and urban India was 6.85 per cent and 6.00 per cent, respectively. Among groups, cereals and products, eggs, spices, among others, contributed to the elevation in retail inflation in January. Inflation in January grew mainly due to a rise in food inflation which climbed to 5.94 percent for the reported month from 4.19 percent in December. In December last year, the CPI came below the Reserve Bank of India’s (RBI) upper margin of 6 per cent for the first time in the calendar year. The government has mandated the central bank to maintain retail inflation at four per cent with a margin of two per cent on either side. On Wednesday last week, the Reserve Bank of India increased the repo rate by 25 basis points to 6.50 per cent to arrest inflation. Since May last year, the RBI has increased the short-term lending rate by 250 basis points, including the latest 25 bps hike, to tame inflation. Raising repo rate helps in cooling demand in the economy and thus helps in managing inflation.