CPI Inflation eases to two-year low

The annual Consumer Price Index has cooled-off to two-year low of 3.63%, its lowest level in last 2 years. This has been brought about by the sharp fall in food prices. The figure for October was 4.2%.

This is the first macro data to be released by the government after demonetisation was implemented more than a month ago. It is the crash in perishable prices which have helped inflation to come down. The inflation in pulses has also come down due to good production. Further the contraction in demand has also cooled off prices of various commodities. Furthermore the services PMI has contracted faster than manufacturing PMI which will also have an apparent effect on inflationary trends. RBI is expected to make desired rate cuts in February. There is a risk of rising oil prices which may dampen the same.