BENGALURU (Reuters) – India’s retail inflation likely accelerated to a seven-month high in May on rising food prices, but it is expected to remain well below the Reserve Bank of India’s target, giving it room to ease policy further, a Reuters poll found.
The RBI changed its stance to “accommodative” from “neutral” last week and cut interest rates for the third time in a row, bringing the borrowing rate to a nine-year low of 5.75%.
June - Reuters - Poll - Economists - Inflation
According to a June 4-7 Reuters poll of over 40 economists, the retail inflation rate rose to 3.01 percent in May from a year earlier, up from 2.92 percent in April. Forecasts ranged between 2.83-3.50%.
If the consensus forecast is met, consumer prices will rise at their fastest pace since October, but would still be lower than the central bank’s medium-term target for a 4.0% increase for a tenth consecutive month.
Food - Prices - March - October - Food
Food prices have steadily risen since March after contracting from October 2018-February 2019. Food prices constitute nearly half of India’s inflation basket.
“The uptick in retail inflation is because of higher vegetable prices,” said Sameer Narang, chief economist at Bank of Baroda.
Pre-monsoon - Rains - Bit - Schedule - Productivity
“Pre-monsoon rains have been delayed and are below normal. It has put sowing a bit behind (schedule) because of which productivity will be low, pushing prices higher.”
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