POLL-India’s retail price inflation likely eased in July, still far from RBI target

Band Arsh Tushar Mogre

BENGALURU, August 10 (Reuters)India’s retail price inflation likely eased in July due to a drop in food and fuel prices, but remained well above the Reserve Bank of India’s upper tolerance limit for a seventh consecutive month, according to a Reuters poll.

Food prices, which account for almost half of the consumer price index basket, fell last month. But most of the slowdown came from an easing in international prices and the lagged effect of government interventions aimed at reducing import duties and restrictions on wheat exports.

The near-term inflation outlook remains highly uncertain as the uneven nature of this year’s monsoon and the weak rupiah could dampen the effectiveness of the government’s efforts to rein in consumer price inflation.

The August 2-9 Reuters poll of 48 economists showed inflation, as measured by the consumer price index (CPI) INCPY=ECIlikely fell to 6.78% in July, a five-month low, from 7.01% in June.

Forecasts ranged from 6.40% to 7.10% for the data, which is due at 12:00 GMT on August 12.

“Food and energy prices are essentially falling quite marginally, even as the rupee hit all-time lows in recent weeks,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics. .

“It (inflation) may remain sticky over the next few months, but it won’t be much worse than where we are now.”

Wholesale price inflation INWPI=ICE was seen moderating to 14.20% in July from 15.18% in June, according to the poll.

While the lagged effect of a reduction in fuel taxes has helped to limit price pressures somewhat, consumer price inflation is expected to continue at a strong pace over the coming months.

India’s central bank, relatively lagging behind in the global tightening cycle, raised interest rates by 50 basis points on Friday to 5.40%, lifting them above their pre-pandemic level, with further rate hikes expected. RBI/INT

Governor Shaktikanta Das warned that still high living standards could translate into higher wages and inflation, which are unlikely to fall to the upper end of the mandatory target range until December.

That’s roughly in line with a separate Reuters poll that found inflation to remain above target through early next year. ECILT/IN

“We believe that the RBI will continue to raise rates over the next few months. We expect a hike of at least 25 basis points in September, followed by another hike of 25 basis points in December 2022,” he said. said Mitul Kotecha, head of emerging markets strategy at TD Securities, noting the risks cited by Das including inflation remaining above the target range for a few more months.

(Reporting by Arsh Tushar Mogre; Polling by Anant Chandak and Devayani Sathyan; Editing by Jason Neely)

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