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CPI Inflation Remains Above RBI’s Target Band For Second Straight Month – BloombergQuint

Retail inflation rose by over 6% for the second straight month, led by costs of food and fuel.

Consumer Price Index inflation stood at 6.26% in June 2021 compared to 6.3% in May, according to data released by the Ministry of Statistics and Program Implementation on Monday. Inflation in food and beverages rose to 5.58%, compared to 5.24% in May, driven by prices of oils, fats, eggs, pulses and fruits.

A Bloomberg poll of 38 economists had estimated inflation at 6.59% for June 2021.

Inflation has exceeded the Monetary Policy Committee’s target of 4 (+/-2)%, for the second straight month, leading to questions over whether the panel can continue with its accommodative stance to help revive growth.

The CPI inflation for June 2021 offered a modicum of relief, easing marginally from the previous month, despite a pick-up in food inflation and rising retail fuel prices, said Aditi Nayar, chief economist at ICRA. However, following today’s CPI inflation print, we expect the inflation forecasts to be revised upwards in the next MPC review, she said.

While interest rates and the monetary policy stance may remain unchanged, an underlying tone of uneasiness in the commentary is likely, Nayar said.

Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, said the MPC is expected to retain its current guidance in the August policy, leaning in favour of growth. Towards the end of the year, gradual policy normalisation will be underway, she said.

High frequency mandi data shows further moderation in food prices in July, signaling a return of sub-6% inflation readings going ahead, Bhardwaj said.