Food fury complicates the inflation trajectory

livemint.com:

during the summer monthsisn’t new, but even the month-on-month food and beverage inflation is the steepest in 20 months, at 2.2%. Vegetable prices were the big culprit, rising 12.2% month-on-month, but the rise in other food items, while not so pronounced, was also significant. While prices were expected to rise, erratic weather has exacerbated the situation.Cereal prices, which had begun to soften, rose in June from the previous month and continued to print double-digit inflation rates.

The sequential rise in the prices of protein products such as pulses, eggs, and meat, among others, has been strong for a few months now. Vegetable prices will recede after new crops arrive in the market over the next couple of months. But they still threaten to keep headline inflation at risk due to the weather impact.

The sowing of major kharif crops this southwest monsoon season remains under stress despite recent improvement in rainfall. All this could also delay the beginning of any possible cuts in interest rates by the Reserve Bank of India, economists said, even though the current drivers of inflation—the seasonal effect and supply-side shortages—are not under the control of the monetary policy committee. Vegetable inflation played spoilsport, but it had nothing to do with high tomato prices.

Rather, tomatoes were a downward force: without them, inflation would have been higher, at 5.2% instead of 4.8%. That’s because tomatoes were still not as expensive as they were last June, and were deep in deflation, with a 35% year-on-year decline despite a monthly jump of nearly 65%. However, tomatoes could return to the inflation zone in July, the month when their prices really spiralled out of control.