Fuel index eases, food gets dearer
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July 15: India’s fuel inflation eased on lower industrial fuel prices, but food inflation snapped a two-week easing trend in early July, reinforcing expectations for a 25-basis points hike in the central bank’s July-end policy review. The headline inflation in June was 10.55 per cent, data released on Wednesday showed.
The fuel price index rose 14.27 per cent compared with the previous week’s 18.02 per cent, while food price index rose an annual 12.81 per cent in the year to July 3 against its 12.63 percent reading in the previous week.
Food inflation edged up marginally because of higher rice and wheat prices, data showed. The Reserve Bank of India is widely expected to raise key policy rates by 25-bps in its policy review later this month, after three rate hikes this year, including a 25-bps raise in key policy rates on July 2. Analysts say the sharp revisions in the headline inflation number in March and April have maintained the case for further monetary tightening by the central bank on July 27 and even after that.
The RBI could raise the repo rate, the rate at which it lends to banks by another 50 bps by the end of December, a Reuters poll of 21 economists showed. Key policy makers have been advocating that the food prices will moderate by the end of this year, betting on good monsoons and strong harvest to cool the prices from the high levels touched towards the end of last year, when the worst drought in 37 years hit farm output.
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