New Delhi July 12 2022: India’s consumer price gains ruled above the central bank’s target for a sixth straight month in June, signalling more interest rate hikes could be in store for Asia’s third-largest economy.
Retail inflation rose 7.01 per cent in June from a year earlier, the Statistics Ministry said in a statement on Tuesday (Jul 12). That compares with a 7.04 per cent increase in May, and an estimate of a 7.10 per cent increase in a Bloomberg survey of economists.
Price gains remain elevated as the rupee has slumped more than 6 per cent this year, keeping India’s import bill high despite easing global commodity prices. A member of India’s rate-setting panel Shashanka Bhide recently said that the central bank may need to raise interest rates more aggressively even as Governor Shaktikanta Das expects inflation to ease starting October.
The Reserve Bank of India, which has raised borrowing costs by 90 basis points in two straight moves, is due to announce the next rate decision on August 4. The central bank targets inflation between 2 per cent to 6 per cent.
Food prices, which comprise about half of the inflation basket, accelerated 7.75 per cent in June, while fuel and electricity prices went up 10.39 per cent from a year ago. Clothing and footwear prices increased 9.52 per cent, while housing prices rose 3.93 per cent.
“Goods inflation is showing signs of peaking if current trends in global commodities persist,” said Gaura Sen Gupta, economist at IDFC First Bank. “Services inflation which is determined more by domestic factors is likely to stay firm as consumption rotates from goods to services.”
High prices may sour demand and risk denting growth as companies pass on costs to consumers. For now, firms are able to secure new orders despite charging more for their services, as shown by purchasing managers’ surveys.
Industrial output rose to a one-year high of 19.6 per cent in May from a year ago, data released separately by the Statistics Ministry showed. That was lower than the survey estimate of a 20.8 per cent increase.
Wholesale price inflation, which surged to 15.88 per cent in May, is projected to ease to 15.63 per cent in June data due Thursday, according to a separate Bloomberg survey.
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