Home / Economy / Economists betting on 7% June inflation

Retail inflation likely remained unchanged in June as cheaper fuel and a base effect offset sequential price hikes from food inflation, a Mint poll of 27 economists found.

The poll’s median estimate put June inflation at 7%, marginally below May’s 7.04%, but still uncomfortably above the Reserve Bank of India’s upper tolerance limit of 6%. Inflation has stayed above that limit every month this year.

About three-fourths of the economists surveyed expect inflation to stay the same or cross 7%, but seven see it moderating below 7%. Predictions in the survey ranged from 6.45% to 7.32%.

Sakshi Gupta, an economist at HDFC Bank, whose estimate was 7.05%, said inflation remained high in June on the back of elevated food prices, particularly vegetables and cereals.

“However, excise duty cuts on petrol and diesel, along with the reduction in edible oil prices, are likely to keep further upside pressures in check," she said.

If June inflation comes in around the poll forecast of 7%, it will have averaged 7.3% during the April-June quarter.

At its last meeting, the Reserve Bank of India’s monetary policy committee (MPC) forecast full-quarter inflation at 7.5%. India’s inflation is expected to ease gradually in the second half of the current financial year, RBI governor Shaktikanta Das said recently.

“If market participants take comfort from the fact that CPI inflation is averaging 20 bps (basis points) lower than the RBI’s forecast of April-June, even when the average is above 7%, it will just prove that inflation expectations have worsened so much that even a 7% CPI print is now being welcomed with a sigh of relief," Kaushik Das, chief economist at Deutsche Bank, said in a report.

The situation is similar worldwide, with several major central banks initiating rate hike cycles to control elevated inflation.

RBI’s monetary policy committee (MPC) has also resolved to focus on the withdrawal of accommodation to ensure that inflation remains within the target while supporting growth.

“We view the RBI’s new inflation forecast of 6.7% for FY23 as optimistic and believe inflation has yet to peak, with our projection at 7.5%. We maintain our forecast for a terminal repo rate of 6.25% by April 2023, with a 35-bps rate hike in August, followed by 25-bps rate hikes in each of the following four policy meetings," noted economists at Nomura.

Economists at Barclays noted that core inflation, which excludes food and fuel, will average around 6.1% in the current fiscal, with risks inclined to the upside as “services-related inflation momentum could gain traction in the coming months".

ABOUT THE AUTHOR

Manjul Paul

Manjul Paul is a data journalist. She joined Mint in October 2021. Previously, she worked witth the Reuters polling team in Bangalore as a correspondent for four years.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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