Retail inflation shoots up to 4.87 per cent in May

Marco Green
June 13, 2018

Retail inflation rose to a four-month high at 4.87% in May while India's factory output recovered only marginally to grow at 4.9% in April, days after the Reserve Bank of India (RBI) raised interest rates for the first time in four years citing inflation concerns.

A vendor puts onions in a sack after sorting them at a vegetable market in Mumbai, India, June 12, 2018.

The Federal Reserve on Wednesday is widely expected to raise USA rates for the second time this year.

Analysts polled by Reuters had forecast May's annual increase in the consumer price index at 4.83 per cent, compared with April's provisional 4.58 per cent.

Retail inflation now stands at a four-month high after topping the 4.58 per cent it recorded in April.

"With both core and headline inflation only likely to face greater upside pressure from various factors in the coming months, we continue to expect one more 0.25 per cent rate hike from the RBI".

RBI had said the decision of the Monetary Policy Committee to hike the rate was consistent with the neutral stance and in consonance with the objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of (+/-) 2 per cent, while supporting growth.

The banking regulator has revised the first half inflation projection to 4.8-4.9 per cent in the current fiscal, and 4.7 per cent in the second half - including the HRA impact of central government employees.

The Indian economy grew 7.7% year-on-year in January-March, its quickest pace in almost two years driven by higher growth in manufacturing, the farm sector and construction, data showed last month.

However, Brent crude prices have been volatile more recently on reports that Russian Federation and Saudi Arabia could increase oil production.

Average petrol and diesel prices are their highest since August 2014.

The rupee has depreciated 5.3 percent since January 1, pushing up the prices of imported items such as electronic goods and machinery.

On Tuesday, the ONS said wage growth slowed to 2.8% in the three months to April from 2.9%.

"However, these effects have been partly offset by price falls in computer games and energy costs rising by less than this time past year". In 2017-18, the economy is estimated to have grown at 6.6%.

Other reports by Click Lancashire

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