India’s retail inflation is anticipated to be around 5 per cent in June, according to surveys by the Reserve Bank of India, the central bank chief stated on Thursday.
Governor Shaktikanta Das mentioned that the RBI will release the neutral rate after completing the current analysis within 1-2 months in an interview.
June’s retail inflation data, expected on Friday, is estimated at 4.80 per cent by a Reuters poll.
Unexpected and elongated heatwaves have sent food prices through the roof in many places across India, with the seasonal phenomenon potentially creating a problem for the policymakers. The RBI’s rate setting panel has a target of bringing down the retail inflation reading to 4 per cent.
Seasonal pressure on the food basket is set to send India’s retail inflation higher than its May reading of 4.75 per cent.
With inflation expected to stay above the Reserve Bank of India’s 4% medium-term target this fiscal year and next, the central bank is forecast to cut rates just once this year, next quarter.
“A delayed start to the southwest monsoon and prolonged heatwave is likely to have pushed June inflation to 5% YoY, higher than the trend anticipated earlier in the month. As June progressed vegetable prices began to rise sharply, alongside pressure from a telecom tariff price hike, and a moderate rise in Kharif MSPs,” said Radhika Rao, Executive Director and Senior Economist, DBS Bank.
“At this juncture, with rain regaining momentum into July, vegetable prices are expected to moderate, benefiting from the crop’s short growth cycle. Base effects will also push July-August inflation to sub-4%, allaying concerns. Nonetheless, the RBI has already signaled that they will look through base effect-driven swings in readings, instead of focusing on sticky food pressures,” she added.
Rao expects the RBI to put rate cut plans on hold this year.