Core Inflation Expected to Maintain 3% Level Through Early FY25, Economists Predict

The stability of core inflation, which excludes volatile items such as fuel and food, is forecasted by economists to hold around the 3% mark until the first quarter of fiscal year 2025. This projection is attributed largely to a subdued demand in rural areas. Despite the broader context of an apparently robust economy, the situation is characterized by lackluster wage growth and dampened private consumption, both of which play a significant role in keeping core inflation rates low.

Rural Demand and Core Inflation

Rural areas, often a driving force in domestic consumption, have shown weakened demand that is likely to contribute to an extended period of lower-than-average core inflation. The restricted financial growth in these segments underscores the challenges faced by the economy in achieving balanced expansion.

Wage Stagnation and Consumer Spending

The issue of stagnant wages is pressing. Despite a strong economic landscape, wages have not kept pace, leading to a reduction in purchasing power for consumers. This is compounded by muted levels of private consumption, which traditionally serves as a backbone for economic growth. The suppression of these economic drivers is seen as a contributing factor to the anticipated trajectory of core inflation remaining around the 3% threshold.

inflation, economy, analysis