Retail inflation hits 6.1% in June, but RBI may cut rates

NEW DELHI: Retail inflation accelerated in June due to higher food, clothing, footwear and intoxicant prices and the jump was above expectations of economists and pointed to price pressures, amid the national lockdown imposed to ward off the spread of coronavirus.
Data released by the National Statistical Organisation (NSO) on Monday showed inflation as measured by the consumer price index (CPI) rose an annual 6.1% in June, higher than the 5.8% in March.The NSO did not release the overall inflation numbers for two months due to difficulty in getting responses from the field due to the lockdown. In June, the rural inflation was at 6.2%, while urban was at 5.9%. Food price index rose an annual 7.9% in June.
Economists said they expect food prices to ease on the back of a good monsoon and robust farm sector. They also said provision of free foodgrains under the Pradhan Mantri Garib Kalyan Ann Yojana is expected to ease the overall demand-supply balance for certain cereals and pulses, and aid in cooling prices.
“In our view, the MPC will choose to frontload its assessment of the space for further rate cuts, in a bid to support sentiment and hasten transmission, amid the substantial surplus in systemic liquidity, although the decision is unlikely to be unanimous. We expect an asymmetric cut of 25 bps in the repo rate and 35 bps in the reverse repo rate in the next policy meeting,” said Aditi Nayar, principal economist at ratings agency ICRA.