Adds comments
Aug 12 (Reuters) - India's annual retail inflation INCPIY=ECIaccelerated to 4.45% in July on higher food prices, a pace that's unlikely to push the central bank to change its outlook on raising interest rates.
COMMENTARY:
ALEXANDRA HERMANN PRASAD, LEAD ECONOMIST, OXFORD ECONOMICS, LONDON
"After today’s benign reading, India’s inflation upswing still has further to run. An erratic monsoon and higher fertiliser costs will continue pushing food prices higher, companies are increasingly passing higher input costs on to consumers, and the favourable base effects from last September’s GST reform will soon fade."
"The RBI can afford to be patient for now, but not forever. Mounting evidence of second-round effects and rising medium-term inflation expectations will make the supply shock increasingly difficult to look through. We expect policymakers to hold fire in October, but to deliver a 25bp rate hike in December."
ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD, NEW DELHI
"We project the CPI inflation to harden to 4.7% in August 2026, and cross the 5% mark in September 2026, as the base effect turns unfavourable. Overall, CPI inflation is expected to average 5% in FY2027, in line with the MPC's forecast, with the prolonging of tensions in West Asia and monsoon outturn posing risks to the upside."
"In our view, while immediate policy tightening is unlikely, elevated inflation projections for Q3 FY2027 through Q1 FY2028, suggest that the next move on rates is going to be a hike. Evidence of a generalisation in inflationary pressures in the next few months could result in a rate hike in the December 2026 meeting."
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
"Going forward, we continue to expect inflation to rise above 5% from September onwards, keeping the case alive for RBI to turn towards interest rate hike before the end of the year."
"Uneven monsoons, rising global cereal, vegetable oil prices and second order effects of higher input costs remain the major risks to the inflation trajectory ahead."
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
"Inflation came in line with expectations. We continue to monitor the pace of rainfall and reservoir levels along with trend in crude oil prices and pass through of higher input prices."
"While core inflation remains benign for now, headline inflation is expected to trend higher above 5% from 3QFY27. We thus continue to see room for 50bp of rate hikes by the MPC in 2HFY27."
TANAY DALAL, SVP II-BUSINESS & ECONOMIC RESEARCH, AXIS BANK, MUMBAI
"Beyond the expected uptick in CPI inflation to 4.45% with core inflation remaining steady, we appear to be seeing the materialisation of risks from petroproducts feeding into textiles, transport and hospitality, as well as from AI-driven chip inflation spilling over into domestic electronics."
SREEJITH BALASUBRAMANIAN, SENIOR ECONOMIST - FIXED INCOME, BANDHAN AMC, MUMBAI
"Data implies Core CPI excluding precious metals likely inched up from June but stayed below 3% and is expected to move up further in the coming months."
"Supply side pressures from shipping issues through the Strait of Hormuz and monsoon rainfall remain key monitorables. We continue to expect not more than 50 bps rate hikes by the RBI this fiscal year, if it hikes at all."
TERESA JOHN, LEAD ECONOMIST, NIRMAL BANG, MUMBAI
"CPI inflation was broadly in line with expectations. A pickup in the monsoon, largely stable Kharif sowing and comfortable buffer stocks of rice and wheat provide further comfort on the food inflation outlook."
"We see some downside to the RBI's 5% inflation estimate and expect the RBI to remain on an extended pause through FY 2027."
(Reporting by Vijay Malkar, Aleef Jahan, Saikeerthi, Surbhi Misra, Anuran Sadhu, Abinaya V and Nishit Navin in Bengaluru; Compiled by Chandini Monnappa and Abinaya V; Editing by Mrigank Dhaniwala)