Bengaluru: India’s retail inflation There is a possibility of a slight decline in May, but it has remained very high reserve Bank of IndiaUpper tolerance limit for the fifth month in a row, as lower fuel prices offset rising food costs, a Reuters survey found.
But the decline is expected to be temporary and analysts say reserve Bank of India Interest rates are on the way to increase.
Late last month, the government announced several changes in the tax structure imposed on essential goods and cut fuel tax to protect consumers from rising prices and fight high inflation.
Although consumer prices are not expected to see the full effect until June, economists say these measures have helped reverse the upward trend in prices.
But a sharp rise in the prices of wheat, tomatoes, potatoes and other vegetables – staple ingredients in every Indian kitchen – will keep inflation high. Due to dry weather and heat wave in North India, crop yields have decreased.
A June 6-9 Reuters poll of 45 economists showed inflation as measured by the consumer price index (CPI) slipped to 7.10% in May from 7.79% in April a year earlier.
Forecasts for the data, due 1200 GMT on 14 June, were in the 6.70%-8.30% range.
ANZ Economist Dheeraj Nim The government’s fuel tax has reduced prices by about 10% compared to earlier this year.
“However, food inflation is rising rapidly, especially during the summer months starting from May,” he added.
Rising food prices have become a major concern for families already hit by the pandemic.
Food inflation, which accounts for nearly half of the CPI basket, rose 8.38% year-on-year in April, the highest in nearly two years. The depreciation of more than 4% in the rupee against the dollar this year has also made imports costlier.
This means that interest rates are set to continue rising.
After a surprise 40-basis-point hike in an unscheduled meeting in May, the RBI on Wednesday raised its repo rate by another 50 basis points to 4.90% and said inflation remains in its 6% upper tolerance band by December this year. will remain above
“A lot of the current pressures are heavily supply-side driven. There is really little that RBI can do directly to contain this in the short term,” it said. Michael ChankoChief Emerging Asia Economist at Pantheon Macroeconomics.
But the decline is expected to be temporary and analysts say reserve Bank of India Interest rates are on the way to increase.
Late last month, the government announced several changes in the tax structure imposed on essential goods and cut fuel tax to protect consumers from rising prices and fight high inflation.
Although consumer prices are not expected to see the full effect until June, economists say these measures have helped reverse the upward trend in prices.
But a sharp rise in the prices of wheat, tomatoes, potatoes and other vegetables – staple ingredients in every Indian kitchen – will keep inflation high. Due to dry weather and heat wave in North India, crop yields have decreased.
A June 6-9 Reuters poll of 45 economists showed inflation as measured by the consumer price index (CPI) slipped to 7.10% in May from 7.79% in April a year earlier.
Forecasts for the data, due 1200 GMT on 14 June, were in the 6.70%-8.30% range.
ANZ Economist Dheeraj Nim The government’s fuel tax has reduced prices by about 10% compared to earlier this year.
“However, food inflation is rising rapidly, especially during the summer months starting from May,” he added.
Rising food prices have become a major concern for families already hit by the pandemic.
Food inflation, which accounts for nearly half of the CPI basket, rose 8.38% year-on-year in April, the highest in nearly two years. The depreciation of more than 4% in the rupee against the dollar this year has also made imports costlier.
This means that interest rates are set to continue rising.
After a surprise 40-basis-point hike in an unscheduled meeting in May, the RBI on Wednesday raised its repo rate by another 50 basis points to 4.90% and said inflation remains in its 6% upper tolerance band by December this year. will remain above
“A lot of the current pressures are heavily supply-side driven. There is really little that RBI can do directly to contain this in the short term,” it said. Michael ChankoChief Emerging Asia Economist at Pantheon Macroeconomics.