A Reserve Bank of India (RBI) report said prices of food items like cereals, pulses, and edible oils remained steady in May. The RBI’s monthly State of the Economy report said the increase in the prices of cereals was primarily because of the surge in wheat prices.
Among key vegetables, tomato prices rose sharply, while onion prices moderated. Potato prices also hardened in May so far. The report also noted that the domestic macroeconomic conditions continued to gain strength as activity started to normalise in spite of resurgence in Covid-19 cases in some parts of the country.
While retail prices of petrol and diesel in the four major metros have remained steady so far this month, LPG prices have increased by Rs 50 per cylinder. Consumer price index (CPI) -based inflation rose to 7.8 percent in April, from 7 percent in March, on account of an acceleration across all major groups.
The MPC held an unscheduled meeting in the first week of the month and decided to increase the repo rate by 40 basis points to 4.4 percent to tackle inflation, which has now hovered above the upper limit of the RBI’s inflation target of four per cent, plus or minus two per cent, for four consecutive months.
In response to the RBI’s repo rate hike, banks have started adjusting their benchmark rates for loan pricing upwards. The report added, “The move to increase benchmark rates by some major banks is guiding the direction of lending and deposit rates of non-banking financial companies (NBFCs). Some major non-banks [had] increased their deposit and lending rates in April.”
