Friday, July 1

India’s May retail inflation eases to 7.04% y/y

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BENGALURU — India’s annual retail inflation eased marginally to 7.04% in May from a year earlier, after touching an eight-year high of 7.79% in the previous month, government data released on Monday showed.

Analysts in a Reuters poll had predicted annual inflation of 7.10%, well above the Reserve Bank of India’s (RBI) upper tolerance limit.



“A fifth consecutive print above 6.0% and the second above 7.0% this year would continue to mean front-loaded rate action by the RBI. A lower print than that of April is mainly on account of statistical base effect and reduction in central excise duties on petrol and diesel.”

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“But with the price of Indian basket of crude inching close to its Ukraine conflict high and food inflation hovering around 8.0%, we may not have yet heard the last about peak inflation unless oil companies continue to bear the burden of loss.”

“With the shocker of an inflation reading in the United States suggesting no let-up in the Federal Reserve aggression, one has to brace for another strong action by the RBI in the next meeting.”


“Led by lower pump prices post excise duty cuts and supported by base effect, CPI inflation for May 2022 posted a lower number. However, since the last excise duty cut, incremental pressure has developed in terms of higher crude oil prices and continued supply- side disruptions. The MPC (Monetary Policy Committee) is expected to hike policy repo rate by an additional 60 to 75 bps this financial year to rein in inflationary pressures.”

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SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM “Inflation moderated in April, but this was driven by a high base from last year. On a sequential basis, inflation continues to gain momentum and signs of broad basing of inflationary pressures remain the worrying bit . We could see inflation remaining above or close to 7% until September. There are more upside risks to this forecast with oil prices remaining relentless. The RBI is likely to take the repo rate up to 6% by the fiscal year-end, front -loading its rate hikes.”

(Reporting by Chris Thomas, Nallur Sethuraman and Rama Venkat in Bengaluru; Editing by Aditya Soni)

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