CPI stabilises above RBI’s target

Inflation, as measured by the Consumer Price Index (CPI), remained stable at 7.0% on-year in June as in the previous month, but was higher than 6.3% seen in June last year. This marked the sixth consecutive month of headline inflation remaining above the Reserve Bank of India’s (RBI’s) target of 2-6%. While food inflation moderated, fuel and core inflation rose during the month.

The June inflation print reflects persistent underlying pressure on all categories. That said, government interventions have helped ease the burden on some items such as transport fuels, pulses, and edible oils. A normal and well-distributed monsoon is critical for taming food inflation. Although international commodity prices have softened recently, they remain higher on-year for most commodities. Owing to these factors, we expect CPI inflation to average 6.8% this fiscal, up from 5.5% in the previous year.

Inflation trends in June: highlights

• CPI inflation was stable at 7.0% in June as in the previous month, but higher than 6.3% in June 2021
• Food inflation moderated to 7.7% from 8.0% in May, but was much higher than 5.1% a year ago
• Fuel inflation rose to 10.4% from 9.5% in the previous month, but was lower than 12.6% a year ago
• Core CPI inflation remained sticky, slightly higher at 6.0% in June compared with 5.9% in May, but lower than 6.1% a year ago
• Within core inflation, both goods (excluding transportation) and services saw a rise
• Rural inflation remained unchanged at 7.1% as in May, while urban inflation slowed to 6.9% from 7.1%