According to government data released on Friday, retail inflation slowed to 6.71% in July, primarily due to a moderated increase in food costs.
Retail inflation peaked in June at 7.01 percent and fell to 5.59 percent in July 2021. The results show that food inflation decreased from 7.75 percent in June to 6.75 percent in July 2022.
While still over the Reserve Bank of India’s upper tolerance level of 6%, retail inflation as measured by the Consumer Price Index (CPI) continued to rise. For the previous seven months, it has remained above the 6% threshold.
Retail inflation stayed above 7% in the first three months of the current fiscal.
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.”