CPI inflation shots up 17-month high of 6.95% in March 2022

12 Apr 2022 , 08:19 PM

India’s retail inflation jumped to a 17-month high of 6.95 per cent in March 2022, according to data released by the Ministry of Statistics and Programme Implementation.

Food prices, which contribute to nearly half of the consumer price index (CPI), jumped by 7.68 per cent yoy in March as compared with 5.85 per cent a month before.

Aditi Nayar, Chief Economist, ICRA said “the CPI inflation shot up well beyond our expectations, touching a 17-month high of 6.95% in March 2022, led predominantly by a sharper than anticipated surge in some components of food and beverages such as meat and fish. Most other components printed broadly in line with our forecasts, suggesting that a gradual pass through of the commodity price pressures has commenced.”

“With the MPC having signalled an imminent stance change, the rate hike cycle may begin as early as June 2022, if the next CPI inflation print doesn’t significantly cool off from the March 2022 level. We now expect to see 50-75 bps of rate hikes by the end of Q2 FY2023, followed by a pause in H2 FY2023, and perhaps another 50 bps of hikes in FY2024.”

“With the CPI inflation surging in March 2022, we expect the 10-year G-sec yield to cross 7.2% imminently. With dimming hopes of early bond index inclusion, the 10-year G-sec yield could test 7.5% in H1 FY2023.”