India’s August consumer price inflation accelerates to 7% YoY

Analysts polled by Reuters had forecast annual inflation of 6.9% in August, down from 6.71% the previous month.

COMMENT

KUNAL KUNDU, INDIA CONOMIST, SOCIETE GENERALE, BENGALURU

“Another inflation print of 7% in line with our expectations confirms our belief that price pressure will not subside anytime soon, although as a year-on-year print inflation may not peak. .

“As expected, food prices have also surged. Given the tailwind generated by high food prices as production suffers due to an erratic monsoon, we do not see the cut in misfortune of consumers emptying themselves of sitt.

“We expect a further 60 basis point rate hike by the Reserve Bank of India (RBI) before it ends the rate hike cycle as it puts the focus back on growth given the rather gloomy job situation.”

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

“Inflation for the month of August rose to 7%, led by higher food inflation — particularly for cereals affected by uneven monsoons. Core inflation remained stable at close to 6%. Grain inflation continues to be a concern and could lead to further pressure on CPI printing in September as well.

“The RBI is expected to hike rates by 50 basis points in the next policy as inflationary pressures continue to linger. Additionally, while domestic conditions remain the RBI’s primary concern, aggressive tightening globally could incentivize the central bank to continue rate hikes at the forefront of defending the currency and therefore inflation matters.”

GARIMA KAPOOR, CONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

“CPI inflation for August increased slightly due to the resurgence of food prices amid bad weather and an expected shortfall in the production of some raw materials such as paddy. However, food prices were partially offset by lower fuel prices.

“Looking ahead, the CPI should follow a path below 6% by the fourth quarter of FY23, as the gains made during the recent correction in commodity prices begin to be reflected in retail prices. We expect the Monetary Policy Committee (MPC) to raise the repo rate by a further 25-35 basis points in its September policy before pausing to assess the impact of rate hikes undertaken since May 2022.”

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

“Negative seasonality in some food commodity groups, spillovers from erratic rainfall and the consequent rise in cereals boosted the food sub-component.

“Easing supply pressure (oil prices in particular) offset, while core inflation (excluding food and fuel) rose 5.8% year-on-year.

“The evolution of the inflation trend broadly follows the central bank’s forecast for the second quarter of FY23 and is unlikely to trigger a change in policy stance. With base effects which should boost the overall impression in September and fade thereafter, we expect the central bank to moderate the quantum of rate hikes going forward.”

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