Analysts at Nomura note that India’s CPI inflation rose to 5% y-o-y in June from 4.9% in May, lower than expected (Consensus: 5.3%, Nomura: 5.2%).
“The (lower) surprise was mainly in food price inflation, which moderated to 2.9% y-o-y in June vs 3.1% in May, led largely by a sequential moderation in fruits and the usual glut-led deflationary pressure in pulses. Indeed, food price inflation has risen less than usual so far this year. However, fuel inflation rose to 7.1% y-o-y in June from 5.8% and core inflation (CPI ex-food & beverages, fuel) to 6.6% from 6.3%.”
“Core momentum sticky and uncomfortable: The pick-up in core inflation is partly owing to base effects, but the sequential momentum remains elevated. Seasonally adjusted, we estimate that “super core” inflation (CPI ex-food & beverages, fuel, housing rent, petrol and diesel) rose by 0.46% m-o-m in June, still elevated, albeit marginally lower than the average of 0.63% m-o-m in the past three months. Core pressures were particularly significant in the non-tradable services categories of recreation and education. On a year-on-year basis (Figure 4), trimmed mean inflation rose to 4.8% (from 4.7% in May) and super core to 5.7% (from 5.4%).”
“August hike and then a pause: The continued build-up in core inflation momentum and government policies designed to raise food price inflation are a concern, and we expect the Reserve Bank of India to deliver another 25bp rate hike at its 1 August policy meeting. Beyond August, though, we expect slower growth and a gradual moderation in core inflation to lead to a policy status quo.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.