Easing vegetable prices help retail inflation drop marginally

Thanks to a dip in vegetable prices, the retail inflation dropped marginally to 7.01 per cent in June.

However the curve still remained above the Reserve Bank's comfort level for the sixth month in a row.

The consumer price index (CPI) based inflation stood at 7.04 per cent in the preceding month of May and 6.26 per cent in June 2021.

Inflation in the food basket in June 2022 was 7.75 per cent, compared to 7.97 per cent in the previous month, as per the National Statistical Office (NSO) data released on Tuesday.

The RBI has the mandate to ensure that inflation remains at 4 per cent, with a margin of 2 per cent on either side.

However, retail inflation is ruling above the RBI's upper tolerance limit of 6 per cent since January 2022.

As per the data, the inflation print in vegetables eased to 17.37 per cent during the month from 18.26 per cent in May, while for 'pulses and products' it slowed to (-) 1.02 per cent against (-)0.42 per cent.

However, the rate of price rise in 'cereals and products' moved up to 5.66 per cent, from 5.33 per cent in the preceding month.

Inflation in the 'fuel and light' category rose to 10.39 per cent as against 9.54 per cent, while that for fruits increased to 3.10 per cent from 2.33 per cent.

Last month, the Reserve Bank in its bi-monthly monetary policy review raised the benchmark repo rate -- at which it lends short-term money to banks -- by a sharp 0.50 per cent to 4.90 per cent to rein in spiralling prices. It followed an off-cycle meeting on May 4, when the central bank hiked the repo rate by 0.40 per cent.

Governor Shaktikanta Das had said the global geopolitical situation remains fluid and commodity markets remain on the edge, rendering heightened uncertainty to the domestic inflation outlook.

However, certain positive developments such as expectations of a normal south-west monsoon and kharif agricultural season, recent supply side measures taken by the government as well as lifting of palm oil export ban by Indonesia may help ease the acute price pressures to some extent, he had said.

The RBI also raised its retail inflation forecast for the current financial year to 6.7 per cent from its previous estimate of 5.7 per cent.

On Saturday, the RBI Governor while speaking at the Kautilya Economic Conclave exuded confidence that the price situation will gradually improve in the second half of the current fiscal.

He also said the central bank would continue to take monetary measures to anchor inflation with a view to achieving strong and sustainable growth.

The Governor said price stability is key to maintaining macroeconomic and financial stability and the central bank will undertake necessary measures for the same.

PTI with edits