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.[2] The spike is being linked to higher food and energy costs, partly driven by disruptions and uncertainty arising from the ongoing Middle East conflict.[2] The breach of the target has increased market expectations that the RBI may consider interest rate hikes to contain price pressures.[2] Elevated crude oil prices and supply-chain disturbances in shipping lanes are adding to imported inflation.[2] The data suggests that the inflation trajectory could complicate India’s growth-inflation balance in the near term.[2] Policymakers are likely to closely monitor food price trends, particularly cereals and vegetables, which have a high weight in the CPI basket.[2] The development comes at a time when global financial conditions are already tight, limiting the space for accommodative monetary policy.[2]
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%.