CPI - Headline numbers
CPI - Component wise
What’s caused this spike?
- This spike in inflation was primarily led by vegetables (mainly tomatoes, onions, spinach, brinjal, garlic, green chilies and okra). Vegetables, as a whole, contributed to nearly 32% of CPI inflation.
- Apart from vegetables, cereals (mainly rice), pulses (mainly arhar/tur), and spices (mainly jeera) contributed to the sequential surge.
So, will this lead to rate hikes again?
Most likely not. The reason being that excluding vegetables, the CPI was at 5.4% (only 20 bps higher than June).
In August and RBI’s high frequency data points to some softening in vegetable prices.
What’s bothering markets?
In my limited understanding, I think this fall is mainly driven by global factors. We are seeing a massive slowdown in China’s economy leading to a deflationary pressure and this effect can most likely spillover to other economies.
US, on the other hand is facing headwinds related to the rising debt levels along with the alarmingly rise rates in its bond yields which will eventually hurt emerging economies as it is already reflecting in our currency markets with USDINR breaching the 83 mark and going above 52 week and all time lows.
So, what are your thoughts on this? Will our economy and markets overcome these headwinds and climb the wall of worries or are we heading towards lower levels?
