Surging food prices seen pushing up India’s inflation in June

economictimes.indiatimes.com:

Spiraling prices of tomato, onion and pulses are emerging as new risks for India’s retail inflation, reaffirming expectations of a hawkish hold from the central bank for the rest of the year. After moderating for four months, consumer price inflation probably accelerated to 4.6% in June, according to a Bloomberg survey of economists. That compares with a 25-month low reading of 4.25% in May. Official data is due 5:30 p.m. local time Wednesday. The gains are broadly in line with the Reserve Bank of India’s projections, but an impact on supply chains and crops due to an erratic weather may fan the prices further. That means the central bank will take longer to reach the mid-point of its 2%-6% target, delaying a pivot to rate cut to support growth. It left the rates unchanged in the last two meetings to see the impact of past hikes on inflation. High borrowing costs may further dent demand in Asia’s third-largest economy where growth has lost pace tracking a global slowdown. It may also pause the rally in India’s stocks which have touched record highs, according to some market watchers. Economists are crunching numbers to gauge the impact of the sharp acceleration in food prices on headline inflation in the coming months. A jump of more than 400% in the prices of tomato since the start of the year will likely push up inflation beyond the RBI’s target ceiling in the July reading due next month. “The weather-related price disruption has also been seen in other vegetables and most notably in onion prices,” said Anubhuti Sahay, an economist with Standard Chartered Bank. She sees the risk of inflation touching 6% in July if the increase in food prices is sustained.

«We estimate CPI gains quickened in June after a four-month