What Economists Said On August Retail Inflation Rising To 7%

Retail inflation rises again to 7%, above RBI’s higher finish threshold for eight months


The annual retail inflation accelerated to 7% in August, snapping a three-month downward development, pushed by an increase in meals costs, authorities knowledge confirmed on Monday.

Analysts in a Reuters ballot had predicted annual inflation of 6.9% in August, in contrast with 6.71% the earlier month.

Kunal Kundu, India Economist, Societe Generale, Bengaluru

“Another inflation print of 7% bang in line with our expectation confirms our belief that price pressure is not going to go away anytime soon, although being a year-on-year print, inflation may be off the peak.

“Expectedly meals costs moved up sharply as effectively. Given the tailwind generated by excessive meals costs as manufacturing suffers attributable to erratic monsoon, we don’t see shoppers’ cup of woes emptying out quickly.

“We expect an additional 60 bps rate hike by the Reserve Bank of India (RBI) before they bring the rate hike cycle to an end as they shift the focus back to growth given the rather dismal employment situation.”

Sakshi Gupta, Principal Economist, HDFC Bank, Gurugram

“Inflation for August is back up to 7% led by higher food inflation – particularly in cereals impacted by uneven monsoons. Core inflation continued to remain sticky close to 6%. Cereal inflation continues to be a concern and could lead to further pressure on the CPI print in September as well.

“The RBI is more likely to increase charges by 50 foundation factors on the upcoming coverage as inflationary pressures proceed to linger. Moreover, whereas home situations stay the first focus for the RBI, aggressive tightening globally may nudge the central financial institution to proceed entrance loading fee hikes as a defence for the foreign money and in flip imported inflation.”

Garima Kapoor, Economist, Institutional Equities, Elara Capital, Mumbai

“August CPI inflation edged larger amid resurgence in meals costs amid inclement climate and anticipated scarcity of output of sure commodities like paddy. The uptick in meals costs was nevertheless partly compensated by decrease gasoline costs.

“Going forward, CPI should track sub-6% trajectory by Q4FY23 as gains during recent commodity price correction begin to reflect in retail prices. We expect the monetary policy committee (MPC) to hike policy repo rate by another 25-35 bps in September policy before it pauses to assess the impact of rate hikes undertaken since May 2022.”

Radhika Rao, Senior Economist, DBS Bank, Singapore

“Negative seasonality in select food groups, fallout of uneven rainfall and resultant uptick in cereals perked the food sub-component.

“Easing supply-side stress (oil costs particularly) was a counterweight, whereas core inflation (ex meals and gasoline) ticked as much as 5.8% y/y.

“The evolving inflation trend largely tracks the central bank’s forecast for 2QFY23 and is unlikely to trigger a change in policy guidance. With base effects expected to perk the headline print in September and ease thereafter, we expect the central bank to moderate the quantum of rate hikes going forward.”

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