Agri Buzz: Domestic Edible Oil Prices Expected To Soften Further Says RBI

5 Aug 2022 , 12:24 PM

The RBI Governor Shaktikanta Das stated in latest monetary policy update that June 2022 was the sixth consecutive month when headline CPI inflation remained at or above the upper tolerance level of 6 per cent. Looking ahead, the inflation trajectory continues to be heavily contingent upon the evolving geopolitical developments, international commodity market dynamics, global financial market developments and the spatial and temporal distribution of the south-west monsoon. Since the last MPC meeting, however, there has been some let-up in global commodity prices – particularly in prices of industrial metals – and some softening in global food prices. Domestic edible oil prices are expected to soften further on the back of improving supplies from key producing countries and Government’s supply-side interventions. The resumption of wheat supply from the Black Sea region, if it sustains, could help to temper international prices. Supply chain pressures, though elevated, are on an easing trajectory. Further, the advance of the south west monsoon is by and large on track and kharif sowing has picked up in recent weeks. The shortfall in kharif sowing of paddy, however, needs to be watched closely, although buffer stocks are quite large. Household inflation expectations have eased, but they still remain elevated. Incidence of unseasonal and excessive rainfall, if any, can impact food prices, especially vegetable prices. Greater transmission of input cost pressures to selling prices across manufacturing and services sectors may also create fresh price pressures. Moreover, persistently elevated cost of living conditions could translate to higher wages and further price increases, especially if pricing power of firms strengthen. Taking into account these factors, and on the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of US$ 105 per barrel, inflation is projected at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.4 per cent; and Q4 at 5.8 per cent, with risks evenly balanced. CPI inflation for Q1:2023-24 is projected at 5.0 per cent.Powered by Commodity Insights