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Critical Topics and Their Significance for the UPSC CSE Examination on April 11, 2025

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US retail inflation cools to 2.4% in March

For Preliminary Examination:  Current events of national and international Significance

For Mains Examination: GS III - Economy

Context:

Underlying US inflation cooled broadly in March, indicating some relief for consumerss prior to widespread tariffs that risk contributing to price pressures.

The consumer price index, excluding often volatile food and energy costs, increased 0.1 per cent from February, the least in nine months, according to Bureau of Labor Statistics data

Read about:

Retail Inflation

Food Inflation

Key takeaways:

• Retail inflation refers to the rise in prices of goods and services that consumers purchase for their daily needs. It reflects the change in the cost of living for the average consumer and is measured by the Consumer Price Index (CPI).
• When we talk about inflation in everyday terms—like the increase in the price of vegetables, fuel, clothes, transport, and healthcare—we're actually referring to retail inflation.
• To understand retail inflation better, imagine a household that spends money on a fixed basket of goods every month. If the total cost of this basket increases over time, it means inflation is rising.
• For example, if this basket cost ₹1,000 last year and ₹1,050 this year, the inflation rate is 5%. This percentage increase is what we refer to as the retail inflation rate.
• Retail inflation matters because it directly affects people's purchasing power. When prices go up, the value of money goes down, and people can buy fewer goods and services with the same amount of income.
• This impacts the common man more severely, especially lower-income groups, since a larger portion of their income goes towards basic necessities like food, transport, and housing.
• The government and the Reserve Bank of India (RBI) monitor retail inflation closely. The RBI, in particular, uses inflation data to decide monetary policies, such as changing interest rates.
• If inflation is high, the RBI might increase interest rates to curb spending and bring prices down. If inflation is too low, it might lower interest rates to boost demand in the economy.
• Thus, retail inflation is not just an economic term but a crucial indicator of how affordable life is for ordinary citizens and how stable the economy is overall

Monetary Policy Committee(MPC)

The Monetary Policy Committee (MPC) is a key decision-making body in India that is responsible for setting the repo rate, which is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks. By changing this rate, the MPC influences interest rates in the economy, thereby controlling inflation and ensuring economic stability.

The committee was formally established in