Retail inflation dipped marginally to 6.44 percent in February, primarily on account of a slight easing in prices of food and fuel items, as per government data released on March 13.

It remained above Reserve Bank of India’s  6 percent upper tolerance band for the second straight month in February 2023. Except for November and December 2022, retail inflation has remained above the RBI's upper tolerance level of 6 percent since January 2022. The inflation rate based on the Consumer Price Index (CPI) stood at 6.52 percent in January and 6.07 percent in February 2022.

The inflation rate for the food basket was 5.95 percent in February, lower than 6 percent in January. The Reserve Bank has projected retail inflation at 6.5 percent for 2022-23, with the January-December quarter at 5.7 percent. The central bank has been mandated by the government to ensure the retail inflation remains at 4 percent with a margin of 2 percent on either side.

To contain the rising prices, central bank  has hiked interest rates by 250 basis points since May last year. Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 percent range for three quarters in a row. 

The Consumer Price Index (CPI) based retail inflation was 6.52 per cent in January, after declining to a one-year low level of 5.72 per cent in December. "Given two consecutive CPI inflation prints above 6%, the MPC may go in for another rate hike, although the decision is likely to be non unanimous based on the minutes of the last review. Moreover, global developments over the next three weeks could impact the MPC's decision," said Icra Chief Economist Aditi Nayar.

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