CPI Inflation Down, But Road Ahead Could Be Bumpy: SBI Report

India’s Consumer Price Index (CPI) inflation dropped to 3.54 per cent in July 2024, its lowest in nearly five years, largely driven by a decline in vegetable prices.

However, despite this positive development, the State Bank of India (SBI) has cautioned that the path forward may be challenging, according to the SBI research report.

The dramatic reduction in vegetable inflation, which plummeted from 29.3 per cent in June to a mere 6.8 per cent in July, played a crucial role in achieving this multiyear low. The weighted contribution of vegetables to the overall CPI also shrank from 1.77 per cent in June to 0.55 per cent in July, underscoring their impact on the headline inflation figure.

Additionally, the prices of fruits and fuel showed signs of moderation, contributing further to easing inflationary pressures. However, th is broadbased relief was tempered by a slight uptick in core CPI inflation, which excludes food and fuel prices. The SBI’s latest report highlights that the once-dominant “Follow the Fed” mantra appears to be waning, with an increasing number of central banks prioritizing domestic economic conditions over synchronizing with U.S. rate decisions, signaling a shift in global monetary policy dynamics.