There was a broad-based increase in price levels across all the key segments of the CPI index and core inflation rose to a near 4 year (46 months ) high of 6.2%.
Inflation has surged significantly higher than what it was a year ago, an analysis by CARE Ratings has shown. Given the upward risks, the Reserve Bank of India hiked the repo rate by 25 basis points for the first time in four-and-half-years. “There was a broad-based increase in price levels across all the key segments of the CPI index and core inflation rose to a near 4 year (46 months ) high of 6.2%,” CARE ratings said in a report.
The core inflation has surpassed the upper bands of the RBI’s target for CPI target and is an area of concern, the report added. Given the sustained increase in inflation and building concerns over the same could prompt the RBI to undertake further monetary tightening in the coming months, the report said.
“Inflation is likely to be pressured in the next 2 months and could see some easing from August 2018 onwards provided global oil prices remain stable,” the report said. The RBI revised the projected CPI inflation to 4.8-4.9% in H1 and 4.7% in H2.
The central bank said that the crude oil prices are posing “considerable uncertainty” to the inflation outlook. However, there are several other risks as well, the RBI said.
“The headline inflation outlook is driven primarily by two countervailing effects. On the one hand, CPI inflation excluding food and fuel rose sharply in April over March by 80 basis points to reach an ex-HRA level of 5.3 per cent, suggesting a hardening of underlying inflationary pressures… On the other hand, food inflation has remained muted over the past few months and the usual seasonal pickup delayed, softening the projections in the short run,” the RBI said in its June MPC statement.