India’s CPI inflation rose to breach 5.0% in Jun-24 after three months of displaying high stability
Download ReportQuantEco Research || Jun-24 CPI inflation - Food plays spoilsport
CPI inflation breached 5.0% in Jun-24, coming in at 5.08%YoY versus 4.75% in May-24. The upside was expectedly led by broad-based food price pressures that intensified beyond the usual summer seasonal impact due to lingering impact of heatwaves, which got exacerbated by slow progress of monsoon in Jun-24, despite the timely onset. Looking ahead, Jul-24 should witness some reprieve in food prices as rainfall activity picks up and MSP hike has been non-inflationary. CPI inflation is projected to look extremely benign over Jul-24 and Aug-24, likely to slip well below 4.0% aided by a strong favorable base. While this will be viewed in positive light by market participants, but should be taken in a stride since RBI’s own Q2 FY25 projected pegged at 3.8% has already anchored market expectations well. Post Aug-24, we expect CPI inflation to behave broadly stable in the range of 4.5-5.0%, to average at 4.5% in FY25. Keeping in mind the evolving growth-inflation dynamics, we now expect RBI to commence its rate easing cycle in Q3 FY25.