CPI inflation in June accelerates to 22 month high of 5.77%

Dampening the hopes of a rate cut in policy review in August, the retail inflation or the Consumer Price Index (CPI) inflation surged to 22 month high in the month of June, driven by higher food prices. The CPI inflation grew by 5.77 per cent in June, marginally higher than 5.76 per cent in previous month and compared with the 5.40 per cent in June 2015. The June CPI is highest since August 2014 when it was 7.03 per cent. Though, the increase is modest and may start cooling soon with monsoon looking good so far, but it has dashed the hopes of a rate cut in August policy review.

As per the data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation the CPI (Rural, Urban, Combined) on Base 2012=100 in June stood at  6.20 percent, 5.26 percent and 5.77 percent respectively compared to 6.07 percent, 4.55 percent and 5.40 percent in the same period a year ago. Similarly Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined stood at 7.61 percent, 8.16 percent and 7.79 percent respectively as against 5.61 percent, 5.24 percent and 5.48 percent respectively a year ago. The General Indices (Provisional) for the month of June 2016 for Rural, Urban and Combined were, 131.8, 128.1 and 130.1 respectively. The CFPI for Rural, Urban and Combined for the same month were, 135.8, 139.1 and 137.0 respectively.

Food inflation which counts for nearly half of CPI, advanced to 7.79 per cent in June from a revised 7.47 per cent in May. Inflation in vegetables at 14.74 per cent as against 10.77 per cent in May was a significant contributor to the overall retail inflation, while the price rise in cereals and related products was 3.07 per cent as against 2.59 per cent in May. However, the rate of price gains in pulses slowed to 26.86 per cent in June from 31.57 per cent in May.

Meanwhile, sugar & Confectionery inflation was reported at 16.79 per cent versus 13.96 per cent month-on-month. Urban Consumer Housing inflation rose to 5.46 per cent versus 5.35 per cent month-on-month. Pulses & Products Price inflation declined to 26.86 per cent versus 31.57 per cent month-on-month. Milk & Products Inflation came in at 3.43 per cent versus 3.53 per cent and Cereals & Products inflation was 3.07 per cent versus 2.59 per cent month-on-month.

With inflation remaining at an elevated level and above the 5 per cent-mark, RBIs next monetary policy review on August 9, would be keenly watched as inflation targeting has been the main objective of the apex bank.