Bets on rate cut off as inflation flares
MUMBAI : The surprise surge in retail inflation for June has prompted economists to raise their forecast for July amid firming vegetable prices, dashing hopes of a rate cut anytime soon. Inflation measured on the Consumer Price Index (CPI) came in at 4.81% in June, higher than 4.6% predicted by Mint poll of 19 economists, led by food inflation. After the June price rise data was released, economists now believe inflation could average 5-5.4% in the current fiscal year, higher than their previous estimates.
The monetary policy committee (MPC) of the Reserve Bank of India (RBI) forecast inflation at 5.1% in 2023-24. To be sure, inflation averaged 4.6% in the June quarter, the same as what the central bank forecast. Inflation stood at 4.3% in May, a near 25-month low.
“The June CPI inflation printing at 4.81% year-on-year (as against 4.3% in May), higher than Bloomberg consensus estimate of 4.6%, is definitely bad news and looks like food inflation is going to cause havoc over the next few months, based on the data available thus far," said Kaushik Das, chief economist, India and South Asia, Deutsche Bank. Tomato prices have increased over 240% month-on-month in the first 10 days of July, Das said, citing data from the Department of Consumer Affairs. If the current food price trend continues in July as well, rising food inflation will likely push headline CPI inflation above the 6% mark in July and August of 2023.
Retail inflation had breached RBI’s 2-6% tolerance band in January and February before softening in subsequent months. Inflation had overshot RBI’s target for three consecutive quarters last year between January and October. Economists believe that the central bank would rather wait for data on crop harvest in the
. Read more on livemint.com
