August inflation surges at 7.55%; reduces pressure on RBI to ease

August inflation has surged at 7.55% (month-on-month), coming way beyond analysts analysts expectations of around 7%. The number is also above the 6.87% reported for the month of July and now poses a fresh challenge for the RBI to reduce interest rates going forward.

The June WPI inflation has also been revised upwards to 7.58%.

The index for fuel and power rose 3.1 percent, while the index for manufactured products rose by 0.8%.

The higher than expected rate of inflation will now ease pressure on the RBI to reduce rates when its meets on September 17, for its Monetary Policy Review. It's widely expected that keeping in mind today's inflation number the RBI would keep repo rates unchanged.

The RBI has constantly been advised to cut rates in order to propel growth rates in the economy. However, it has been reluctant to do so given the high inflation rates. Today's inflation number only vindicates its decision in the last two months to hold interest rates steady. With the increase in diesel prices on Thursday, it's unlikely that inflation would cool-off anytime soon.

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