India's June retail inflation rises 6.26% y/y

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FILE PHOTO: Illustration photo of an India Rupee note

BENGALURU (Reuters) - India's retail inflation rose 6.26% in June from a year ago, government data released on Monday showed.

Analysts in a Reuters poll had predicted annual inflation at 6.58% for the month.

COMMENTARY

RUPA REGA NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS, MUMBAI

"There was no surprise in this data. The Reserve Bank of India (RBI) too has made its approach and stance clear in the coming months. Markets may suffer from temporary nervousness but it will not sustain for long. Gradual revival in economic activity and liquidity assurance will restore the balance."

RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE

"Beyond the monthly swings, inflation continues to stay above the mid-point of the inflation target since late 2019, underpinning inflationary expectations. Pipeline risks are in focus from service inflation as the second wave ebbs, pass-through from higher input prices as well as sub-normal southwest monsoon."

"The RBI Monetary Policy Committee (MPC) is likely to stay focused on growth with an eye on the risks of a third wave, but members are likely to express discomfort on the recent bout of sticky inflation, in the absence of supply-side measures."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"Food inflation is ticking up and it would likely remain elevated given the weaker than expected monsoon and a fall in gross sown area for agri crops."

"Core inflation continuing to push closer to 6% does indicate that despite headline inflation being cost push in nature, elevated level of prices is not as transitory that the central bank would like to believe, and hence, they may not be able to continue to ignore inflation to support growth."

"We think that as far as policy rate hike is concerned, it is no longer a question of 'if' but a question of 'when'. We believe that the eventual decision will depend on the timing and intensity of the third wave. A moderate and relatively well contained third wave could engender a rate hike earlier than we are expecting (currently penciled at 2Q22)."

ANAGHA DEODHAR, CHIEF ECONOMIST, ICICI SECURITIES, MUMBAI

"The inflation print for June came in sharply lower than our and consensus estimate. Of late, there have been questions about the accuracy of CPI data releases due to truncated data collection. Nonetheless, the lower than expected inflation is likely to provide a relief to the economy. More importantly, core inflation has also eased in June indicating softening underlying price pressures."

SREEJITH BALASUBRAMANIAN, ECONOMIST AT IDFC AMC, MUMBAI

"June print could possibly be the peak year-on-year reading for a few months, aided by base effects which reverse after November. Fuel price change, trajectory of food prices, ongoing stickiness of core inflation (particularly for services), nature of pent up demand, any spill over of input price pressures onto the end consumer and the path of the pandemic would all matter."

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURGAON

"Following today's CPI inflation print, we expect the inflation forecasts to be revised upwards in the next MPC review, amid a status quo in the rates and stance, albeit with an underlying tone of uneasiness in the commentary."

"In our view, the tussle between supporting the nascent, incomplete revival in growth and preserving the anchoring of inflationary expectations will continue."

"The individual MPC members may have a varying tolerance for inflation that persists above the 6% target beyond a quarter, during the revival phase. If the CPI inflation remains entrenched above the 6% upper threshold in the next two prints (July-August 2021), a preponement of rate normalisation can't be ruled out."

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

"The trajectory of inflation from here till October should be downwards and by October we won't be surprised if inflation falls significantly below the 4% mark."

"As far as the RBI's liquidity and interest rate policy is concerned, it's not going to change during the current calendar year, perhaps during the current financial year as well."

"For the RBI, growth will still remain the main focus. The fact of the matter is that there is still a significant amount of demand destruction and there is significant amount of excess capacity, particularly in manufacturing."

"So for India, the trend for inflation should be downwards at least till October. And we don't think inflationary concern is going to be a major macroeconomic challenge in the in the near term."

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"The softer than expected inflation comes as a relief in an environment when the continuing accommodative stance remains a necessity to revive growth."

"We expect the MPC to draw comfort from relatively stable, although still high inflation"

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

"The sequential increase in June prices has been much milder than the sharp spike seen in May. While the seasonal increase in vegetables prices continued along with eggs, and oils and fat, the increase in most other food items were much softer. Core inflation saw some price corrections in recreation and much milder increases across the board compared to May."

"Broadly, even as price correction was not yet visible, the price pressures are reducing. Inflation seems set to track lower towards 5.5% over the next few months."

(Reporting by Vishwadha Chander, Chris Thomas, Nallur Sethuraman and Rama Venkat in Bengaluru; Aftab Ahmed in New Delhi; Editing by Rashmi Aich)

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