Retail inflation up at 5% in December on higher food prices

Retail inflation moved up marginally to 5% in December as prices of some food items, including fruits and vegetables, increased. In November, retail inflation based on the Consumer Price Index (CPI) was at 4.38%.

Retail inflation moved up marginally to 5% in December as prices of some food items, including fruits and vegetables, increased.

In November, retail inflation based on the Consumer Price Index (CPI) was at 4.38% -- the lowest level since government started computing the new series of data in January 2012.

In December 2013, retail inflation was at 9.87%.

Despite surge in retail inflation, analysts expect that RBI may ease interest rate in its February monetary policy review. RBI is scheduled to announce its sixth bi-monthly monetary policy on February 3.

Food inflation rose to 4.78% in December 2014, from 3.14% in previous month, showed the official data which was released on Monday.

Retail prices of vegetables increased by 0.58% as against a decline of 10.9% in November. Fruits were costlier by 14.84%, while the rate of price rise for the same was at 13.74% in previous month.

Category under food and beverages witnessed a rise of 5% in December, over 3.5% in previous month.

Inflation in protein-rich items like eggs, fish and meat was down at 5.24% in December, from 6.48% in the previous month.

Also, prices of oil and fats declined by 1.24% in December over a decline of 0.83% in November.

"We also have a view that the February policy (of RBI) could see a rate cut. But, I would put a caveat that out of all the pre-conditions that the RBI governor laid down in the last policy ... but I am more concerned about how the budget 2015-16 is going to look like.

"But purely on inflation argument, I would say that the time has come for a rate cut," said Samiran Chakraborty, Head of Research, StanChart Bank.