CPI Inflation for Dec 2013 Still Too High at 9.9%

2 comments Written on January 13th, 2014 by
Categories: Inflation

Consumer Price Inflation for December 2013 came in at a lower 9.9%, which is lower only because November was a (revised) 11.16%.

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The big fall has been food, where prices have risen ONLY 12%.

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What’s interesting is that fuel prices seem to be rising only 7%, when the fuel of the masses - diesel - is up more than that. While there is some reduction in clothing prices and those of household items, many of the other items including housing remain at elevated levels.

We seem to have rural inflation above urban levels again, with rural inflation in double digits:

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Impact: While it has come down, CPI inflation is still too high. It doesn’t lend itself to getting a rate cut from the RBI just yet, even though industrial growth is weak. At 9.9% one can only get relief that it wasn’t 10%, but it’s too close to it to say that the worst is behind us.

Oh, yes: This will help CPI Linked Bonds which are on sale in most banks (it seems). The effective rate of return will be a pre-tax 9.9%, but that is still lower than what you can get with tax-free bonds elsewhere. And if inflation continues to go down - which it will because of softening food prices - the tax-free bonds are a better bet.

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http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@capitalmind.in.

2 comments “CPI Inflation for Dec 2013 Still Too High at 9.9%”

CPI inflation comes at 9.87..which is just little bit less than double digits.

Food inflation still at 12% even after the onions and tomato are given free to people in Mandi. Based on the hype created by our bulls in the forum, I was expecting/worrying that this will be shown as -Ve figure.

Now for next month, what Raghuram rajan would do? since we already started giving onions and tomato’s free of cost…

who knows? we may cut rates to celebrate that CPI inflation comes to single digit

kindly note that the rural inflation is still at double digits….

If Raghuram rajan has any self respect he has to raise rates now…he raised rates when CPI was at 8.9 few months back..now since it is 9.9 and not expected to reduce any further..he has to do this..will he?

Beautiful Analysis.