Retail inflation at over 7% in June: Reuters Poll

11 Jul 2022 , 10:26 AM

According to a Reuters poll, India’s retail inflation likely remained stable in June but remained significantly above the Reserve Bank of India’s tolerance level for a sixth month due to decreased gasoline and cooking oil prices offsetting increased services and food prices.

Even though food prices have recently risen significantly and at the quickest rate in almost two years, total inflation has been somewhat restrained as a result of tax reductions on gasoline and diesel and export limitations.

However, the majority of analysts cautioned that the near-term prognosis was extremely unclear because a recent heatwave drove up vegetable prices. Due to dry periods in northern India, the government has also decreased its projections for wheat output.

Inflation as assessed by the consumer price index (CPI) was constant at an annual 7.03% in June, compared to 7.04% in May, according to a Reuters survey of 42 analysts conducted from July 4 to 8.

The data was expected to be released at 1200 GMT on Tuesday, July 12, and predictions ranged from 6.45 percent to 7.70 percent.

If realized, inflation would be beyond the RBI’s upper tolerance goal of 6% for the sixth month and above 7% for a third consecutive month.

According to Rahul Bajoria, chief economist for India at Barclays, “although numerous products and service categories are anticipated to record higher inflation in June, fiscal actions implemented by the government…will assist to restrict the upside in domestic prices across food and other segments.”

Even still, the cost of services is rising, and several industries are seeing a pass-through from rising commodity prices.

The Reserve Bank of India (RBI) is expected to increase interest rates further in the upcoming months, bringing this year’s total increase to 90 basis points, or 4.9%. Recently, RBI Governor Shaktikanta Das stated that it was doubtful that inflation would reach the upper limit of the required goal range until December.

According to the poll, wholesale price inflation only marginally decreased from May’s three-decade high of 15.88 % to 15.50%.

The rupee recently hit a record low of $79.375, prompting worries about increased imported inflation even while consumer price inflation appears to be stabilizing. This was a result of widening trade and current account deficits brought on by rising global crude oil prices.

In the second question in a recent Reuters poll, respondents were asked to predict where the rupee will likely fall over the course of the following three months. The results ranged from 79.50 to 85.00/$, with a median of 80.