Costlier food matching MPC inflation view: RBI
Mumbai: The surge in food prices that led to higher inflation in June is in line with the view of the rate-setting panel that the fight against inflation is far from over, the Reserve Bank of India (RBI) said on Monday. “Food price spikes typical of the onset of the monsoon drove up headline inflation in June, corroborating the monetary policy committee’s (MPC) view that the fight against inflation is far from over and monetary policy has to stay the course on the arduous last leg of the journey to align inflation with the target," said the article titled ‘State of the economy’ in the central bank’s July bulletin.
Written by RBI officials, the article was accompanied by the usual disclaimer that views expressed are those of the authors and do not reflect the views of the organization. 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.
Mint reported on 14 July that the surprise surge in retail inflation for June has prompted economists to raise their forecast for July, with rate cut possibilities looking distant. “In India, the onset of the monsoon is typically a time for a change of gears in the growth trajectory and of sporadic price flares firming up headline inflation as in the reading for June," the bulletin said.
Pointing out that consumption expenditure, the article said, continues to be hamstrung by lingering memories of elevated price pressures which is reflected in lower levels of spending on discretionary items such as personal care and confectionary. According to the bulletin, spending on beverages has been held back by unseasonal rains.
Read more on livemint.com
