The initial shock from food and fuel prices to inflation lies outside the domain of the RBI. Be that as it may, the policy challenge is that food and fuel prices constitute 55 per cent of the CPI and the food shock emanates from external sources, in this case, the war in Europe.
The sequence from this ‘ground zero’ is that households look at recent food and fuel prices which are salient items in the average consumption basket and they form their opinions about what inflation would be in the future, say three months or a year from now.