When we discuss inflation, we frequently refer to the rate of inflation determined by the consumer price index (CPI). The CPI keeps track of changes in the retail prices of the products and services that families buy for their daily needs.

Retail inflation fell to 5.72% in December, the lowest level in a year.
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We calculate the percentage change in the CPI over the same period the year before calculating inflation. Deflation is the term for a decrease in prices (negative inflation). To ensure price stability in the economy, the Central Bank (RBI) gives this figure a great deal of consideration.

The CPI monitors retail prices at a certain level for a particular commodity and; the price movement of goods and services at rural, urban and all-India levels. The change in the price index over some time is referred to as CPI-based inflation or retail inflation.

The Government has commanded the RBI to keep up with retail expansion at 4% with an edge of 2% on one or the other side for five years finishing Walk 2026. Lower food costs, especially the fall in vegetable costs, assisted keep expanding the resistance to running.

Food expansion, which represents around 40% of the expansion rate, came in at 4.19% in December as against 4.67% in the previous month.

Aditi Nayar, Chief  Financial analyst, ICRA, said: “We anticipate that the centre expansion should stay raised in Q4 FY2023, given the proceeds will go through higher information costs by makers and support strong interest for administrations.”

“We are alert that the CPI expansion for January 2023 may print at ~5.8-6.0%, somewhat higher than the levels found in December 2022, given the tenacity in centre expansion and an unsupportive base for food expansion,” Nayar added.

“This expansion print ought to push the RBI to decrease the quantum of its rate climb in February to 25 bps. Going ahead, expansion is supposed to average 6.5% in FY23 and 5.2% in FY24,” said Sakshi Gupta, Head Financial analyst at HDFC Bank

To rein in inflation, the Reserve Bank of India has raised interest rates by 225 basis points, including a 35 basis points hike last week.

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