Favourable base effects will soon fade

Inflation is likely to have edged down in August, due in large part to favourable base effects caused by the spike in food prices a year ago. But these effects are soon likely to fade, which will push up headline inflation over the coming months. And with the monsoon rains having weakened over the past couple of weeks, fears are growing over a renewed spike in food prices. All of which means that the window for further interest rate cuts will soon close.