India’s retail inflation breaches RBI target amid Middle East conflict impact
India’s retail inflation rose above the Reserve Bank of India’s 4% target for the first time in 17 months, according to government data released on Monday. The spike is being linked to higher food and energy costs, partly driven by disruptions and uncertainty arising from the ongoing Middle East conflict. The breach of the target has increased market expectations that the RBI may consider interest rate hikes to contain price pressures. Elevated crude oil prices and supply-chain disturbances in shipping lanes are adding to imported inflation. The data suggests that the inflation trajectory could complicate India’s growth-inflation balance in the near term. Policymakers are likely to closely monitor food price trends, particularly cereals and vegetables, which have a high weight in the CPI basket. The development comes at a time when global financial conditions are already tight, limiting the space for accommodative monetary policy.
Try the question
India’s medium-term inflation target, as followed by the RBI, is set at which level of CPI inflation?
Answer: (c) 4%
The correct answer is (c) 4%.