DNA Money Edit: CPI inflation up, rate cut hopes still linger

The consumer price index (CPI)-based retail inflation inched up to 2.92% in April, from 2.86% in March and 2.57% in February. Though it has remained within the central bank's comfort zone of 4%, going forward there are concerns of a flare-up. The monsoon rains will play a key role.

As per data, the food price inflation, food and beverage inflation and fuel, light inflation have all surged in April. While food price inflation went up to 1.1% from 0.30% in March, food and beverage inflation rose to 1.38% from 0.66% a month ago. Clearly, after witnessing deflation from October 2018 to February 2019, the food component turned into inflation of 0.73% in March and inched up further to 1.1% in April. The fuel, light inflation was recorded at 2.56% in April, up from 2.42% in March. Higher food inflation stems from the rise in crude prices; Brent was at a five-month high at $75 per barrel, causing higher fuel and light inflation.

Of course, the inflation is in line with the Reserve Bank of India's expectations and it is unlikely to overshoot their target anytime in the second half of the 2019-20. This gives a leg room for a 25 basis points rate cut in the next monetary policy in order to infuse the much-needed liquidity in the system and tackle renewed growth concerns.