India’s July consumer inflation eases to 6.71% y/y – govt


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BENGALURU — India’s annual retail inflation eased to 6.71% in July, helped by a lower rise in food prices, but remained above the central bank’s tolerance band of 2%-6% for the seventh month in a row, government data released on Friday showed.

Analysts in a Reuters poll had predicted annual inflation of 6.78% in July, compared with 7.01% in the previous month.

COMMENTARY

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

“Inflation coming in slightly lower than our and market expectation suggests expectation of continued price pressure is not unfounded.”

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“As things stand now, headline inflation appears to be in line with our FY23 expectation of 6.5% y-o-y. While food inflation eased a tad, core inflation inched up and topped 6.0%, an indication of persistence of price pressure suggesting a rather slow pace of easing of headline inflation.”

“We do see inflation easing adequately in 2023 and stick to our expectation of one final rate hike of 35bp by RBI during October.”

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

“CPI headline inflation for July has moderated in line with our expectations, led largely by food inflation, while the core inflation remains elevated and sticky.”

“The coming few readings are expected to be a tad above 7% with inflation likely to hover above RBI’s upper threshold limit of 6% until January 2023. We expect Repo rate at 6% by end of 2022, followed by a pause and a shift to neutral policy stance.”

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GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

“July CPI inflation moderated amid subdued uptick in food prices and impact of lower oil prices. While CPI inflation will continue to remain above RBI’s tolerance band through this calendar year, decline in global commodity prices, peak out of DXY and turnaround in FII flows in Indian equity market would allow greater policy leeway for MPC to undertake less aggressive hikes from hereon.”

“We expect MPC to hike policy repo rate by another 25 to 35 bps before they pause to assess the impact of 140 bps hike.”

SREEJITH BALASUBRAMANIAN, ECONOMIST, IDFC AMC, MUMBAI

“July headline CPI of 6.7% y/y was down from 7% in June and was primarily driven by much lower momentum in food prices as expected. Sequential momentum in core inflation was higher from last month but eased year-on-year.”

“While real-time prices of edible oils continue to ease till date in August, that of cereals (rice and wheat), pulses and some vegetables have started to move up. Food inflation alongside crude oil price and pass-through of costs by producers would define inflation in the near term while growth and supply chain pressures in the medium term.”

(Reporting by Rama Venkat and Nallur Sethuraman in Bengaluru; Editing by Devika Syamnath)



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