Retail inflation at 6.26% in June, remains above RBI’s comfort zone – Mint

Data released by the statistics office showed retail inflation stood at 6.26% in June, down from 6.3% in May even though food inflation accelerated marginally to 5.15%. During the month, prices of eggs, edible oils, fruits, pulses accelerated in double digits. Fuel inflation also grew 12.7% with rising petrol and diesel prices. Cost of transport communication also shot up with rising fuel prices.

Even though elevated inflation will put pressure on the Reserve Bank of India, it is expected to maintain its policy rates unchanged in its upcoming monetary policy review in August to protect nascent economic recovery from the devastating impact of the coronavirus pandemic.

On escalating inflationary situation, the finance ministry last week said the localised restrictions due to the second wave could have led to some supply-side disruptions contributing to price pressures. “With the encouraging progress of the south-west monsoon, supply side interventions in the pulses and edible oils market, and gradual unlocking of states with declining caseload would mitigate cost pressures going forward. However, rising international commodity prices, especially of crude and logistics costs, pose upside risks to the inflation outlook,” it added.

Global crude oil prices have breached their two-year high mark of $75 per barrel. As per the latest survey conducted in May by RBI, one-year ahead inflation expectations of households have risen to 10.9%, from 10.2% in March — partly reflecting the uncertainty brought about by the severe second wave of covid-19. Accounting for these factors, RBI has projected CPI inflation at 5.2% in the June quarter, 5.4% in the September quarter, 4.7% in the December quarter, and 5.3% in the March quarter of FY22, with risks broadly balanced.