Aggressive interest rate hikes to tackle inflation by controlling cash flow, have led to the collapse of two banks in the US and a crisis in the sector. But the US Federal Reserve won't slow down despite a recession, as inflation remains a concern for countries including India. Despite a marginal drop after a spike in January, retail inflation for February has remained above the Reserve Bank of India's tolerance level of 6 per cent.
Weather patterns and food supply remain concerns
At 6.44 per cent down from 6.52 per cent, the consumer price inflation was hovering above the RBI's threshold for a second straight month in February. Food prices play a major role in retail inflation, as they account for most of the household expenses in India. This year, temperatures rising from February and other erratic weather conditions, are expected to hit agricultural production, and affect food prices.
Milk and cereal rates wash off reduction in vegetable prices
Food inflation for February hit 5.95 per cent, as cereals, milk and fruits continued to get costlier, even as vegetables and fuel prices dropped marginally. As inflation is back above the RBI tolerance limit, the repo rate hikes which were expected to stop after a 25 basis points-increase in February, are expected to continue. The RBI is more likely to push interest rates up by 25 basis once again, to bring consumer inflation below 6 per cent.
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