(Corrects paragraph 1 to say inflation breached target for the first time in 17 months, not 16 months) By Shubham Batra NEW DELHI, July 13 India’s retail inflation accelerated to 4.38% in June, government data showed on Monday, breaching the central bank’s 4% target for the…
rst time in 17 months and setting the stage for an interest rate hiking cycle. The print was above the 4.3% forecast in a Reuters poll of economists and was also the highest since India revamped the consumer price index in January
India’s central bank kept its key interest rate unchanged at 5.25% in June but raised its inflation forecast for the fiscal year to 5.1% from 4.6% earlier, watching for knock-on impact from supply-driven pressures. Inflation was led by higher fuel and food costs, which rose amid Iran war-driven supply disruptions and a delay in seasonal rains. State-owned fuel retailers raised prices four times in May, pushing up transport inflation to 4.31%, quicker than the 1.75% rise in May.
Food inflation accelerated to 5.32% in June from 4.78% in May, on the back of weak monsoon showers. Price pressures could reignite if El Nino, a weather pattern typically associated with weaker monsoon rains in India, disrupts crop production. The monsoon brings about 70% of India’s annual rainfall and is critical for agriculture and rural incomes, with nearly half of farmland lacking irrigation and millions dependent on farming for their livelihood.