Vegetable inflation sends a chill down the spine

May Consumer Price Index (CPI) inflation has come in at 5.76 per cent for May, which is higher than 5.47 per cent for the month of April. Interestingly food inflation has come in at 7.5  per cent for the month of May compared to 6.32 per cent for the month of April. 

The CPI inflation at 5.76 per cent comes as bad news for all those market participants who are betting on policy rate cut in next RBI meet. Governor Rajan due to revised inflation data for April at 5.47, had resisted cutting policy rates in the recently held second bi-monthly meet. With inflation showing no signs of cooling off in recent future, the chances of further rate cut in next RBI meet are close to nil, as the governor himself said that the rate cut will be considered once the inflation level reaches 5 per cent. 

Inflation data for Education has come in at 5.85 per cent for May; for Household goods and services it has risen by 4.83 percent; while for Health it has quickened to 5.1 per cent. For Recreation and amusement it has accelerated to 4.39 per cent.

Food prices are the culprit with a weight-age of over 45 per cent in the CPI index. All hopes are now pinned on the monsoon and the positive effect it may have on the vegetable prices and food articles. The recent upsurge in crude oil prices could also be a major concern as it may lead to increase in WPI.