Inflation surprise

Latest reading has increased uncertainty

The inflation rate based on the Consumer Price Index (CPI) for January, which rose to a three-month high of 6.52 per cent, surprised most analysts by once again going above the upper end of the Reserve Bank of India’s (RBI’s) tolerance band. The rate was driven largely by food prices, particularly those of cereals, which went up by 16.1 per cent year on year. On a month-on-month basis, cereal prices were up by 2.6 per cent. Cereals and products have a weighting of 9.67 per cent in the combined CPI basket. While core inflation also inched up a bit and