Base effects to drag down inflation

Large base effects are likely to have dragged down inflation in July. The Reserve Bank has stated that it will be looking through base effects over the coming months when making policy decisions, instead focussing on the impact of a potentially weak monsoon on local food prices. Even then, there are reasons to be relatively sanguine. Rainfall so far has not been as weak as many had feared, and the government’s ample stockpile of crops should help to keep food inflation in check.