Rising food prices keep inflation at five-year high

Ivan Schwartz
November 15, 2017

Retail or CPI inflation rose to 7-month high of 3.58 per cent in October, driven up by costlier food items, particularly vegetables.

But Alistair Wilson, head of retail platform strategy at Zurich, said wages are likely to increase by between 2.5 and 3.5 per cent next year, meaning the worst of the squeeze on family finances could be coming to an end. That was its first increase in a decade and was due to the fact that inflation has spiked sharply higher since Britain voted in June previous year to leave the European Union, a decision that prompted a sharp fall in the value of the pound.

Food price inflation (combined) stood at 1.90 per cent in October against 1.25 per cent in September and 3.32 per cent in October 2016.

Growth in the cost of living rose to 4.1 per cent in October, the highest rate since September 2013, which impacts poorer people in particular.

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Retail inflation inched up to a seven-month high in October on the back of higher food, fuel and housing prices, dashing hopes of any cut in interest rates by RBI for now.

Sub-category of food and beverages during the month under consideration recorded a rise of 2.26 per cent over the same period a year ago.

Separately, annual industrial output INIP=ECI grew a lower-than-expected 3.8 percent in September, compared with the forecast of 4.2 percent by economists in a Reuters poll, data released on Friday showed. "Similarly, the policymakers should check and address prices of products, including paddy, that are hovering at higher levels and are also of national importance", said Rawat. "However, cut in excise duty announced by the government tempered the price increase in fuel".

Ratings agency Crisil said: "In the months ahead, inflation could see an upside from further rise in oil prices and higher household spending led by implementation of farm loan waiver and an expected upward revision in salary and allowances of state government employees".

Other reports by GizPress

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