Moderation in CPI Inflation: A Double-Edged Sword

The recent moderation in CPI inflation is a positive sign, but experts warn of potential turbulence ahead. With food prices remaining elevated and uneven monsoon rainfall, challenges persist. Despite this, a decline in the Consumer Food Price Index offers hope for future relief in inflation rates.

While the recent moderation in CPI inflation is a welcome development, experts caution that the road ahead could be fraught with challenges. The sequential momentum in food prices remains strong, marked by a 2.5 per cent month-on-month increase, surpassing the average sequential growth rate and suggesting persistent inflationary pressures.

Rajani Sinha, Chief Economist at CareEdge, observed, "Despite the easing of inflation in the food and beverage basket compared to last year, the sequential momentum is strong at a 2.5 per cent M-o-M increase, higher than average," while Dharmakirti Joshi, Chief Economist at CRISIL, pointed out the high-base effect's mixed impact on food and core inflation, warning of continued elevated food prices through July.

Optimistic projections come from Raghvendra Nath of Ladderup Wealth Management, who attributed the decline in CPI primarily to the reduction in the Consumer Food Price Index. However, he warned that geopolitical crises and potential rises in crude oil prices could reverse the downward inflation trend. Meanwhile, Sanjeev Agrawal of the PHD Chamber of Commerce and Industry praised the year-on-year CPI inflation drop to its lowest in nearly five years, driven by significant improvements in food and fuel inflation rates.

(With inputs from agencies.)