Inflation in India is on the rise once again, moving further away from the central bank's target. According to government figures released on Tuesday, the country's consumer price index increased by 5.55% year-on-year in November, up from the 4.87% increase recorded in October. Economists polled by FactSet had anticipated a slightly higher rate of 5.8%.
Food Prices Drive the Increase
The main driver of this inflationary spike was food prices, which rose by over 8% compared to the previous year. Within the food category, vegetables, spices, cereal, and pulses all experienced double-digit price increases. However, there was some relief in fuel prices, which fell in comparison to the same period last year. Other categories, such as clothing and housing, also saw more modest price rises.
Challenges for the Indian Central Bank
This increase in inflation poses a significant challenge for the Reserve Bank of India. Since February of this year, the bank has maintained its key rate at 6.50% after implementing a series of rate hikes aimed at bringing inflation below a 4% target. With the recent uptick in inflation, there might be growing pressure on the bank to resume its rate-hike cycle.
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