Inflation for August 2018 came in at a low 3.69% for August 2018. This is pleasant news with a sliding rupee, which nearly hit 73 to a dollar before reversing. Data for inflation came in much after the forex markets closed, but the foreign market data showed the dollar fall to 71.9 by evening.
The inflation headline number slipped to the lowest since October 2017.
What was the components of it? Food contributed the lowest (less than 1% inflation there) and that’s about 50% of the index. But the remaining components too moderated in inflation compared to last month:
Fuel was at a high – mostly because of the rising crude prices and the dollar-rupee equation. Education costs too were at 6% inflation and continue to rise.
In most of the other cases, we are looking at inflation below the values in July. This is a good sign.
The best part, finally, core inflation has come down! After rising steadily for over a year now, the core inflation (inflation minus food and fuel, which are volatile) has fallen below 6%.
At this point it looks interesting that the core inflation is falling, but it could also be a base effect of last year. We’ll need another month or so to confirm.
Do note however that the impact of fuel prices on goods and then , the rise of the dollar, will not impact prices immediately, but will be something to watch if it sticks around these levels for a while.
Regardless, this low inflation number and the drop off in core inflation speaks well for the economy going forward. Let’s hope it stays on!