What happened
The Reserve Bank of India (RBI) is discussed as taking a dovish approach to core inflation, meaning RBI’s interpretation is consistent with a less aggressive response to near-term inflation pressures. Alongside this, CPI breadth evidence is used to describe whether price changes were spread across many CPI items in the June versus May comparison.
The CPI breadth statistic cited for the June versus May comparison is: 89% of CPI items recorded higher prices in June compared with May. This statistic is used to indicate that inflation movement was broad-based rather than confined to only a small set of items.
Background and earlier position
Core inflation is an inflation measure that removes or down-weights highly volatile components to better reflect the underlying trend in prices. CPI breadth is different: it shows how many categories in the Consumer Price Index (CPI) basket have recorded price increases.
In inflation analysis for monetary policy, core inflation is often used to assess persistence (whether inflation pressure is likely to continue), while CPI breadth is used to assess spread (whether inflation pressure is widespread across CPI categories). When core inflation and CPI breadth provide different signals, economists can disagree on the strength of overall inflation pressure.
Related current affairs
- Dovish RBI’s core inflation views leave economists unconvinced
- 89% of CPI items saw higher prices in June vs May
- Inflation headline CPI rises to 4.38% in June; core inflation steady at 3.9%
- Baking: Can banks lock phone for loan default? What RBI’s new rules say
- RBI should hold rates, but inflation risks from global shocks remain
- Pay wall: Removing UPI’s free nature will not only be unpopular but also unfair