New Delhi: India’s annual retail and wholesale inflation accelerated in April, mainly due to higher fuel and food prices, and in response some economists changed their views to expect a more hawkish central bank at its next policy meeting next month.
The Reserve Bank of India (RBI), due to hold its next policy meeting on June 6, is still widely expected to hold rates after having kept them unchanged for the fourth straight meeting in April.
But with a faster-than-expected pace of retail and wholesale inflation, some economists have changed their mind about the RBI’s next policy move.
“The Reserve Bank of India is likely to adopt a hawkish commentary in June,” said Radhika Rao, an economist at DBS Bank in Singapore.
India’s annual retail inflation accelerated in April to 4.58 per cent, after easing for three straight months, government data showed Monday, mainly driven by faster increases in food and fuel prices.
Core inflation, mainly reflecting firming up manufacturing prices touched 5.9 per cent, at a 44-month high, economists estimated.
Analysts polled by Reuters had forecast April’s CPI inflation at 4.42 per cent, compared with March’s 4.28 per cent.
April was the sixth straight month in which inflation was higher than the RBI’s medium-term target of 4 per cent.
India’s wholesale price inflation in April rose faster than expected, to 3.18 per cent, separate data released by the Ministry of Commerce and Industry Monday showed.
Annual retail food inflation, which contributes about half of the weight in the CPI index, rose 2.80 per cent in April almost at the same level of 2.81 per cent rise in the previous month.
Analysts worry that retail inflation could cross 5 per cent mark in the next two to three months.
As the economy gathers momentum, capacity utilisation could tighten further, which will boost underlying price pressures, said Shilan Shah of Capital Economics in a note Monday.
The biggest risk that Asia’s third-largest economy faces is rising crude oil prices, which hit $78 a barrel last week, their highest since November 2014 following prospects of new US
sanctions on Iran.
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