The consumer price inflation rate fell to a five-month low of 4.35 per cent in September from 5.59 per cent in the previous month as food prices rose at a significantly lower pace of 0.68 per cent, compared with 3.11 per cent over this period, official data showed on Tuesday.

       This justified the accommodative stance of the Reserve Bank of India's monetary policy committee (MPC).

       Part of the fall in the inflation rate can also be explained by the rise in the base effect to 7.27 per cent in September, 2020 from 6.69 per cent in the previous month.

       However, the inflation rate in fuels rose to 13.63 per cent in September from 12.94 per cent in the previous month.

       Within food items, prices fell at a much faster rate of 22.47 per cent in vegetables in September compared to 11.68 per cent in the previous month. CARE Ratings in a note cautioned that vegetable prices have started moving up of late quite sharply which are not getting covered here due to the base effect.

       Oils and fats saw inflation rate rising to 34.19 per cent from 33 per cent in this period.

       Also, prices of household goods and services, which include education, personal care and effects, recreation and amusement, health, transport and communication, rose by a smaller rate of 5.92 per cent against 7.78 per cent during this period. CARE Ratings said high inflation of household goods can be a consideration when festival demand revives especially in October and lasts till December.

       Within household services, pent up demand led to inflation rate in recreation and amusement rising to 7.58 per cent from 6.48 per cent.

       Core inflation, which takes out food and fuel prices, remained elevated at 5.8 per cent in September.

       In its policy review last week, the MPC went for a status quo in the policy rate and maintained its accommodative stance. It reduced its projections for the retail price inflation rate to 5.3 per cent for FY'22 from its earlier prediction of 5.7 per cent. The inflation rate for the first half of the year stood at 5.33 per cent which means that it should fall a bit more if RBI projections are to come true.

       MPC correctly projected the rate at 5.1 per cent in the second quarter of the current financial year. It stood at 5.08 per cent in the quarter.

       Going forward, MPC projected the rate to fall to 4.5 per cent in the third quarter and then rose to 5.8 per cent in the fourth quarter of the year.

       However, global commodity prices, including those of petroleum, could spoil the party. Monetary policy has little effect on global commodity prices.

       Rahul Bajoria, chief India economist at Barclays, said,"Overall, we expect elevated global commodity prices to continue to exert upward pressure on India’s import basket, which in turn we expect to gradually spill over into CPI inflation in the coming months."

       Rajani Sinha, chief economist at Knight Frank India, said high core and fuel inflation remains a cause of concern. "With global economic growth gathering momentum, there could be further upward pressure on commodity prices and the central bank would be wary of that. However, there is unlikely to be any change in policy rates in the current year,” she said.