Moody's Analytics has said India's inflation is at uncomfortably high level, which is an exception among Asian economies. It said higher fuel prices will keep upward pressure on retail inflation and keep the RBI from offering further rate cuts. Retail inflation rose to 5 per cent in February, from 4.1 per cent in January. The Reserve Bank mainly takes into account retail inflation while deciding on the monetary policy. Core inflation (which excludes food, fuel and light) was up 5.6 per cent in February, from 5.3 per cent in January, it said, adding India's inflation is uncomfortably high.
In its macro roundup, it said inflation is subdued in most of Asia, and expected to only gradually pick up over 2021 because of rising oil prices and economies starting to reopen. Brent crude has climbed 26 per cent this year at around $64 per barrel. It was around $30 per barrel in March 2020, when the COVID-19 crisis was near its peak.
It stated India and the Philippines are exceptions. In these economies, inflation is above comfort levels, adding to the list of challenges for policymakers. Stating that India's inflation is worrisome, it said volatile food prices and rising oil prices led retail inflation to exceed the upper band of 6 per cent several times in 2020, inhibiting the RBI's ability to keep accommodative monetary settings in place during the height of the pandemic.