Inflation

Sara Johnson, Executive Director, Economic Research, S&P Global Market Intelligence said: "The global economic outlook has brightened, with the major economies showing resilience in early 2023. However, persistent core inflation will lead to further monetary tightening, restraining growth. With supply conditions improving, progress in reducing inflation will continue.

The fall in wholesale price inflation was owing to a decline in the rate of mineral oils, chemicals and chemical products, textiles, crude petroleum and natural gas, textiles and food products. The wholesale inflation had fallen to 4.95 per cent in December 2022 against 6.12 per cent, which was recorded in November 2022. The fall in WPI inflation in December 2022 too.

"CPI inflation moved to 6.5 per cent in January is higher than our expectations and is worrisome. Sequentially, inflation has snapped a two-month contractionary streak as food inflation and core inflation remained firm," Rajani Sinha, Chief Economist, CARE Ratings told IANS. "Today's inflation shocker led by food as well as consistently higher core inflation momentum has depicted.

As a matter of fact, RBI Governor Shaktikanta Das, announcing the upward revision in the repo rate, said the outlook for inflation is mixed." While prospects for the rabi crop have improved, especially for wheat and oilseeds, risks from adverse weather events remain. The global commodity price outlook, including crude oil, is subject to uncertainties.

According to Pathak, the bond market should react positively. "We expect bond yields to go down gradually though elevated bond supply will limit the downside of yields." Retail inflation for December 2022 fell to a year's low of 5.72 per cent, mainly due to low food prices, especially those of fruits and vegetables.

Inflation in the eurozone peaked at 10.6 per cent last October and has been slowly decreasing since then, Xinhua news agency reported. Energy prices remain the main driver of the eurozone's annual inflation rate, with a 17.2 per cent increase compared to January 2022 (25.5 per cent in December 2022), followed by prices of food, alcohol and tobacco with a year-on-year increase of 14.1 per cent in January (13.8 per cent in December 2022).

As a measure of inflation, the consumer price index (CPI) increase last month was lower than the 7.1 per cent reported in November. The Bureau of Labour Statistics said the drop was aided by the cooling of petrol prices which led to a decrease of the energy index by 4.5 per cent even as other components of the index rose.

Now the scenario is quite different. Even with two or three members, a nuclear family is finding it difficult to control expenses when it comes to spending on necessary items like edible oil, pulses, milk, petroleum, etc.

"Waning input cost pressures, still buoyant corporate sales, and turn-up in investments in fixed assets are heralding the beginning of an upturn in the capex cycle in India, which will contribute to a speeding up of growth momentum in the Indian economy," the bulletin said.

The interest rates on the main refinancing operations, the marginal lending facility and the deposit facility will be increased to 2.5 per cent, 2.75 per cent and 2 per cent, respectively, with effect from December 21, Xinhua news agency quoted the bank as saying in a statement. The inflation outlook, which has been revised substantially higher, has been the main reason behind the ECB's move.