New Delhi: Higher food prices pushed India's retail inflation to an eight-month high in June, government data showed on Monday, dampening hopes of an interest rate cut by the central bank in the near future. Retail prices rose to 5.4 per cent year-on-year in June, higher than the 5.01 per cent print in May and the 5.1 per cent annual rise predicted by analysts in a Reuters poll.
Food prices were up 5.48 per cent from 4.8 per cent in May. "The surprising factor for CPI to go up was that it was food driven ... we expect the RBI (central bank) to be on hold for now," said Sonal Varma, India economist at Nomura.
A stronger-than-expected rise in prices is likely to fuel fresh inflation concerns for the Reserve Bank of India (RBI), which targets inflation of 6 percent by January. Economists said the latest number will dampen enthusiasm for what would be the year's fourth rate cut, particularly given a patchy start to the rainy monsoon season.
"Any hope of a rate cut in the near future is off the table now, given this kind of number, combined with the fact the monsoon has been weaker in the last couple of weeks," said Gaurav Kapur, senior economist at the Royal Bank of Scotland.
India recorded above-average rains in June but forecasters have said the rains, critical for about half the nation's farmland that lacks irrigation facilities, would remain subdued in large parts of the country in the first half of July.
