Annual retail inflation (INCPIY=ECI) was 5.08% in June, up from 4.75% in May. Economists polled by Reuters had forecast inflation at 4.80%.
Prices of food, which account for nearly half of the retail inflation, rose 9.36% from last year in June, compared to an 8.69% rise in May. Food prices have been accelerating at more than 8% year-on-year since November 2023.
COMMENTARY:
SWATI ARORA, ECONOMIST, HDFC BANK, MUMBAI
Food inflation continues to remain high. Going forward, a favourable monsoon is likely to support a moderation in food prices in Q2 FY25.
CPI inflation is expected to move below 4% in Q2, led by a base effect and coupled with a moderation in food prices. We expect CPI to average at 4.6% in FY25.
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
The Reserve Bank of India's monetary policy committee's (MPC) concern over the trajectory of food inflation played out in the June data. Inflation rose 5.1% year on year, close to our forecast of 5%, on higher food costs, reflected in the steeper month-on-month rise assumption vs 0.7% in May.
A weak start to the southwest monsoon in June and a prolonged heatwave impacted vegetable prices, in turn, pushing food and beverages inflation back above 8%.
With the MPC's concerns validated, we don't expect the central bank to deviate from its preference to keep the repo rate on hold when they meet next month.
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
Going forward, inflation is expected to drop from July onwards due to a high base effect.
That said, the RBI is likely to look through these statistical factors and is unlikely to act on the policy rate or stance in the August policy, given the continued pressure seen in food prices.
We continue to see the possibility of rate cuts not before December 2024.
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
The surge in perishable inflation, amid weather-led supply disruptions and stickiness in protein items, led to a spike in inflation in June.
Hereon, although there is a supportive base effect for Q2, the pass-through of telecom tariff hikes will have an impact. We do not see MPC cutting rates before Q4 FY25.
UPASNA BHARDWAJ, CHIEF ECONOMIST KOTAK MAHINDRA BANK, MUMBAI
The CPI inflation came marginally higher than our expectations. While the food inflation risks will continue to dominate in the near term, we expect the better sowing patterns and spatial distribution of rains to eventually ease price pressures beyond these volatile months.
Having said that, the central bank will be in no hurry to ease monetary policy given the headroom from robust growth in the backdrop of near-term inflation risks.
YUVIKA SINGHAL, ECONOMIST, QUANTECO RESEARCH, NEW DELHI
The June inflation build-up was single-handedly driven by food pressures, primarily on two counts – one, peak impact of heatwaves in effect since April, and two, the delayed progress of the Southwest monsoon despite its timely onset last month.
Looking ahead, July should witness some reprieve in food prices as rainfall activity picks up, though perishables prices have continued to remain high so far in the month.
In addition, the hike in telecom tariffs by major telcos will also begin to see some pass-through to consumers.
