Retail Inflation for July eased to its five-month low at 6.71% and remained above the RBI’s range for the 7th straight month. In June, inflation held above 7 percent for the third month in a row, at 7.01 percent from a year ago.
As per the data, the relief was seen in food inflation in July from 6.75% in terms of 7.75% in June. "CPI headline inflation for July has moderated in line with our expectations, led largely by food inflation, while the core inflation remains elevated and sticky," said Upasna Bhardwaj, Chief Economist at Kotak Mahindra.
The bulk of the slowdown was seen in the backdrop of recession fears, which have resulted lowering of global commodity prices, with the international oil benchmark, Brent crude, down about 9 percent for the month, hitting the pre-Ukraine crisis lows and below $100 a barrel.
Experts also believe that the slowdown might be coming through the lagged reflection of the fuel tax cut. The Government interventions in reducing the import duties and restrictions on wheat exports to ensure domestic sufficiency helped too.
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Bhardwaj further added, "The coming few readings are expected to be a tad above 7 percent, with inflation likely to hover above RBI's upper threshold limit of 6 percent until January 2023. We expect repo rate at 6 percent by the end of 2022, followed by a pause and a shift to neutral policy stance.”
Still, consumer price rises are expected to persist at a strong pace in the months ahead, with the RBI's projections pointing to inflation remaining above its upper end of the 2-6 percent target range.