Retail inflation hits three-year low of 3.41% in December

Cash crunch due to demonetisation has suppressed the demand

Retail inflation decelerated slightly to a series low last month, led by a decline in food prices. 

The likely cause is the cash crunch due to demonetisation of high-denomination currency that suppressed demand. This lower rate of consumer inflation enhances the possibility of an interest rate reduction by the monetary policy committee (MPC) in its next meeting. 

Consumer Price Index-based inflation, primary gauge of the central bank, fell to 3.4 per cent in December versus 3.6 per cent in the previous month, data released by the Central Statistics Office showed on Thursday. This was a fifth month in a row