June Retail Inflation Jumps to 5%, Core Inflation to Over 6%
Reuters
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Mumbai/Bengaluru: India's retail inflation rate accelerated to a five-month high of 5.0 % in June, government data showed on Thursday, driven by higher fuel prices and a depreciating rupee.
Analysts polled by Reuters had forecast June's annual increase in the consumer price index at 5.30 %, compared with May's 4.87 %.
June was the eighth straight month in which inflation was higher than the central bank's medium-term target of 4 %.
Indranil Pan, Group Economist, IDFC Bank, Mumbai
"The rupee's depreciation is likely to lead to some input cost pressure for manufacturers and will be felt directly in the WPI releases. This will obviously get passed on to the end user and should have an influence on retail prices. In the event that the pass-through is inefficient and manufacturers are able to absorb some portion of the higher input cost, the likely implication of the rupee's depreciation on inflation will be relatively muted."
"A sharp increase in the core inflation and the higher inflation expectations should worry the RBI rather than the rupee's depreciation pressures. Anyway some adjustment in the rupee was warranted given the higher crude and EM currency depreciation. The currency depreciation has not been too jerky – further there are adequate forex resources to take care of some shocks. Hence, the rupee's weakness is unlikely to be the guiding factor for the RBI to raise rates. It would continue to be the inflation that would guide rate increases."
"We are expecting RBI to raise the policy rate two more times in the current financial year."
Shubhada Rao, Chief Economist, Yes Bank, Mumbai
"This is a hugely positive CPI print as it comes much lower than consensus and our own CPI projection. A clear positive was on the food price momentum that remained muted basis seasonalities. Although core remains elevated that may keep the RBI on guard. We have not yet removed the 'risk' of one more rate hike. However, given the June CPI print, the urgency for tightening may get diluted."
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