CPI Inflation - June 2022 - Comments from Industry Experts

Aditi Nayar, Chief Economist, ICRA.

The CPI inflation print cooled only marginally in June 2022, but nonetheless offered welcome relief, coming in well below our forecast of 7.2%.

The moderation in the CPI inflation in June 2022 for food and beverages, and miscellaneous items, was almost fully offset by higher inflation for pan, tobacco and intoxicants, clothing and footwear, housing, and fuel and light.

The dip in the food inflation in June 2022 was led by eggs, vegetables, edible oils, pulses and sugar. In July 2022, we expect food inflation to cool benefitting from the recent downtrend in edible oils prices, whereas the surge in rainfall may cause a temporary uptick in the prices of perishables. The kharif area sown has recorded a YoY decline of 9.3% till July 8, 2022 owing to an irregular spatial and temporal distribution of monsoon rains, which may limit the gains from the downtrend in global food prices, unless sowing picks up pace in the remaining part of July 2022.

The cut in excise duty on petrol and diesel drove the downtrend in the transport and communication sub-index of miscellaneous items, whereas the services sub-indices reported a pickup in inflation that needs to be watched very carefully.

With commodity prices having eased sharply on the back of a feared global recession, and the decline in vegetable and edible oil prices, the Indian retail inflation prints should soften below 7% in the coming months. However, the sequential momentum in services inflation remains a key monitorable, as high domestic demand is likely to create upward pressure on prices for this sector. We continue to foresee front loaded rate hikes of 60 bps spread over the next two policy reviews followed by an extended pause, as the MPC will focus on containing inflationary expectations without sacrificing growth.

Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities

"CPI inflation in June was in line with expectations at 7%. We have been expecting inflation to remain around the 7% handle for the rest of 1HFY23. Food items continue to see an upside in price momentum, in line with the seasonal trends. Core inflation was flat at 6.2% with price momentum softening slightly from last month. Overall, the June inflation print should keep the RBI on course with the rate hikes without new causes for concern. Inflation should gradually decline in 2HFY23. We continue to pencil in repo rate hike of 35 bps in the August policy and RBI should stay on course to reach 5.75% by end of CY2022."

Source : Equity Bulls

Keywords

CPI Inflation June2022 Comments IndustryExperts ICRA Kotak