Retail inflation plunges to record low of 0.25% in Oct

The decline in inflation in October, like the previous several months, was led by the food group. Inflation for food items, which account for nearly 40% of the inflation basket and have a heavy influence on the headline inflation, plunged to -5.02% from -2.33% in September. The sharp decline was led by vegetables and pulses and products, inflation for which came in at -27.57% and -16.15%, respectively.

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The decline in inflation was led by the food group.

(iStockphoto)

According to Aditi Nayar, chief economist at Icra, the current trend in inflation, along with a dovish tone by the Monetary Policy Committee (MPC), would support a 25-basis-point rate cut in December, unless the second quarter growth surprises on the upside.

While the MPC left the repo rate unchanged in October, governor Sanjay Malhotra noted the possibility of future rate cuts. “The benign outlook for headline and core inflation as a result of the downward revision of projections opens up policy space to further support growth,” the governor said, according to the minutes of the meeting.