India's retail inflation stood at 6.93% in July

Daniel Fowler
August 15, 2020

The combined food price inflation (CFPI) for July stood at 9.62 percent, against 8.72 percent a month ago.

Looking year-over-year, though, the food at home index has been up more than 4% in the last four months and the overall rise in food prices for July of 4.6% y/y was the third-highest increase since 2012, noted Michael Underhill, fund manager at Capital Innovations, in a tweet.

Aditi Nayar, principal economist at ICRA Ratings said the evolving trends for the ongoing month suggest that the retail inflation may remain appreciably above 6% in August, which would be the last inflation print available before the next scheduled MPC review.

July inflation was higher than the 6.15 per cent forecast in a Reuters poll of analysts.

The Federal Reserve has adopted an extraordinarily easy monetary policy, which has seen the US central bank slashing interest rates to near zero as well as making large-scale asset purchases and funneling loans to firms among other measures. Staples like beef saw a jump in prices as demand at the supermarket rose while supply stayed steady.

Higher inflation rate in July was mainly caused by six items - meat & fish (18.81 per cent), pulse & products (15.92 per cent), personal care & effects (13.63 per cent), spices (13.27 per cent), oil & fats (12.41 per cent), vegetables (11.29 per cent).

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"Fed officials will see no reason to be on high alert for inflation pressures after today's modest rebound in producer prices and there is little reason for them to temper their highly stimulative monetary policy", said Chris Rupkey, chief economist at MUFG in NY.

Households' one year ahead inflation expectations were lower than their three months ahead expectations in the July 2020 round of the RBI's survey, indicating their anticipation of lower inflation over the longer horizon.

The report followed on the heels of news on Tuesday that producer prices accelerated in July.

Food-at-home prices had been climbing as retail demand grew with restaurants closed for COVID-19 lockdowns.

The cost of services rebounded 0.5%, the largest gain since April 2019, after dropping 0.3% in June. That followed June's 0.1% gain, which was the smallest rise since July 2013.

Consumers also paid more for healthcare in July, with prices rising 0.4%. The cost of visits to doctors increased 0.7% and prices for hospital services rose 0.2%. Prices for hotel and motel accommodation increased 1.3%. Prices for full service meals increased 0.4%.

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