Wholesale Price Inflation Hits 3-Month Low: What's Next?

Wholesale price-based inflation has dropped to a three-month low of 1.89% in November due to cheaper food items, with predictions of a 0.25% interest rate cut by RBI in February. Despite a dip in vegetable inflation, the prices of potatoes remain high. Global price trends suggest a potential rise in December.

Wholesale price-based inflation has decreased to 1.89%, marking a three-month low for November. The decline was largely attributed to reduced food prices, fueling expectations of a 0.25% interest rate cut by the Reserve Bank of India (RBI) during its policy review in February.

The Wholesale Price Index, which stood at 2.36% in October 2024, saw significant changes in its components, with food item inflation easing to 8.63%, compared to 13.54% in the previous month. Vegetables were a primary driver in this reduction. Despite this, potato inflation remained high at 82.79%, while onion prices fell substantially.

Meanwhile, deflation in the fuel and power category was recorded at 5.83% in November. Barclays noted that primary food inflation softened, offsetting the rise in manufactured product inflation. Retail inflation, as per the Consumer Price Index, moderated to 5.5% in November within the monetary policy committee's target range, expected to approach 4% by March 2025.