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India retail inflation jumps to 4.45% in July, RBI likely to pause
Food inflation rose to 5.52% in July after weaker monsoon rains, while economists said the RBI can stay patient before any potential December rate hike.
India's retail inflation accelerated in July to 4.45% year over year, led by higher food prices, a development that Reuters said is unlikely to force the Reserve Bank of India to raise interest rates over the next few months. The consumer price index marked the second straight month above the RBI's 4% medium term target, but remained within the central bank's 2% to 6% tolerance band. Reuters reported that the RBI left its benchmark policy rate unchanged last week while it looked for clearer evidence on whether inflation pressures are becoming broader-based.
A Reuters poll had pointed to inflation of 4.5% for July. Oxford Economics lead economist Alexandra Hermann Prasad said the RBI can afford to be patient for now, but rising evidence of second-round effects and higher medium-term inflation expectations could make supply shocks harder to ignore, with expectations for policymakers to hold fire in October and deliver a 25 basis point hike in December.
Food inflation climbed to 5.52% in July from 5.32% in June on weak monsoon showers, though it is expected to ease with a recovery in rains that could soften further price pressures tied to El Nino. Reuters also noted that RBI Governor Sanjay Malhotra previously attributed the move above target mainly to higher fuel prices, and that state-run fuel retailers raised gasoline and diesel prices four times in May in response to rising costs related to the U.S.-Iran war.
Latest closeGasoline (RBOB) $2.892 ▼7.8%