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Consumer Inflation Worsens To Nearly 6-Year High, Dashes RBI Rate Cut Hopes
12 Feb 2020, 06:22 PM IST 
Consumer inflation in January stood at the highest rate recorded since May 2014, official data showed
- January's reading meant retail inflation came in much higher above the central bank's medium-term goal of 4 per cent for the fourth month in a row. The RBI tracks consumer inflation primarily for formulating its monetary policy.
- Only this month, the RBI had in its bi-monthly review kept the key rates unchanged at existing levels while maintaining the status quo on its "accommodative" policy stance.
- Economists in a poll conducted by news agency Reuters had expected inflation at 7.40 per cent last month.
- Retail inflation is expected to remain above 6 per cent for next two months, and average around 4.5-5 per cent for the year ending March 2020, credit ratings agency CARE said in a note. With high inflation, the RBI may not go for a rate cut in their next meeting to be held in April, CARE Ratings added.
- The contraction in industrial output, due to 1.2 per cent drop in manufacturing and 0.1 per cent in electricity, was in contrast with a forecast of 1.8 per cent growth by analysts in a separate poll by Reuters.
- "Today's prints have increased the uncertainty around the RBI's future actions," Rupa Rege Nitsure, group chief economist, L&T Financial Holdings, said. "There will be a longer pause in the rate-cutting cycle now."
- The government has estimated economic growth (measured in terms of expansion in gross domestic product) to be at 5 per cent in the current financial year, which will be the worst pace of expansion since the 2008-09 global financial crisis.
- Finance Minister Nirmala Sitharaman - who presented her second Union Budget this month - told Parliament on Tuesday that "green shoots were visible" and the economy was no longer in trouble.
- In the Budget 2020-21, the government outlined huge packages for farming and infrastructure, but only gave a small cut in personal taxes and provided no new incentives for the beleaguered financial and housing sectors.
- Although the budget proposals are widely expected to provide some support to growth over the longer term, some economists say the measures are insufficient to immediately boost the economy.
(With inputs from agencies)