TREAD CAREFULLY WHILE TAMING INFLATION WITH HIGH INTEREST RATES

OCTOBER'S headline inflation print of 4.9 percent-the second decline in two months suggests that this round of our fight against inflation might be nearly over. But the country's designated inflation fighter, the Reserve Bank of India, believes this is not the endgame and warned of further food and energy price shocks.

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Led by an almost 2 percentage point fall in core inflation that touched a 43-month low in October, the headline inflation rate fell to 5 percent and 4.9 percent in September and October, respectively, down from 6.7 percent in 2022-23 and 7.1 percent in JulyAugust 2023. But the RBI sees this as a fleeting reprieve, fearing the one element that has pushed prices higher this fiscal-food inflation. Sadly, elevated food prices continue to be a risk to inflation expectations and as some high-frequency data indicates, cereal and pulse prices are climbing, threatening the central bank's 4 percent inflation mandate.