India’s retail inflation increased to a three-month high of 6.52% in January, government data released on Monday showed. The price rise indicator was at 5.72% in December and 5.88% in November.
This is also the first time in three months that retail inflation has shot above the Reserve Bank of India’s upper tolerance level. The central bank aims to keep inflation between 2% and 6%. In November, inflation had settled within the RBI’s tolerance level for the first time in 2022.
The data released by the Ministry of Statistics and Programme Implementation on Thursday also showed that food inflation increased to 5.43% in January from 4.19% in December.
The fuel and light inflation declined marginally to 10.84% from 10.97%in the previous month.
The retail inflation data came five days after the Reserve Bank of India increased the repo rate by 25 basis points, or 0.25%, to 6.5%. The repo rate is the interest rate at which the central bank lends money to commercial banks.
This was the sixth hike in the repo rate since May. The central bank had raised the repo rate by 35 basis points to 6.25% in December.
Central banks typically increase key lending rates at times of high inflation in economies. Higher key lending rates translate into high interest on loans disbursed by commercial banks. This, in turn, keeps a check on discretionary spending by consumers which is expected to help them with price rises due to high inflation.
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