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The three-month slowdown in retail inflation may end in August. A Reuters survey has said that retail inflation could once again reach 6.9 percent in August due to rising food prices. Retail inflation stood at 6.71 per cent in July.
The 45 economists surveyed have projected retail inflation to range from 6.3 per cent to 7.37 per cent. A quarter of them believe that inflation will reach above 7 per cent in August. Economists say that there has been a sharp jump in food prices in August. The rising heat has affected the supply, leading to a sharp jump in the prices of cereals, pulses and vegetables.
…then RBI can take a tough stand
RBI keeps an eye on retail inflation data in its monetary review on policy interest rates. It is feared that if inflation rises faster than expected, the central bank may take a more strict stance on rates. The government is likely to release retail inflation data for August on September 12.
Policy rates hiked by 1.4 per cent so far
To control inflation, the RBI has increased the policy interest rates by 1.4 per cent since May this year. Economists say that in view of the festive season, if the inflation rate remains stable, the RBI may also adopt a soft stance. The month of October is the month of festive season and most of the earnings of many companies rest on this season. Sentiment could be affected if interest rates rise.