India’s inflation elevated at seven percent on higher food, fuel prices in June

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India’s consumer price gains ruled above the central bank’s target for a sixth straight month in June, signaling more interest rate hikes could be in store for Asia’s third-largest economy.

Retail inflation rose 7.01 percent in June from a year earlier, the Statistics Ministry said in a statement Tuesday. That compares with a 7.04 percent increase in May, and an estimate of a 7.10 percent increase in a Bloomberg survey of economists.

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Price gains remain elevated as the rupee has slumped more than 6 percent this year, keeping India’s import bill high despite easing global commodity prices.

A member of India’s rate-setting panel Shashanka Bhide recently said that the central bank may need to raise interest rates more aggressively even as Governor Shaktikanta Das expects inflation to ease starting October.

The Reserve Bank of India, which has raised borrowing costs by 90 basis points in two straight moves, is due to announce the next rate decision on August 4. The central bank targets inflation between 2 percent to 6 percent.

Food prices, which comprise about half of the inflation basket, accelerated 7.75 percent in June, while fuel and electricity prices went up 10.39 percent from a year ago. Clothing and footwear prices increased 9.52 percent, while housing prices rose 3.93 percent.

“Goods inflation is showing signs of peaking if current trends in global commodities persist,” said Gaura Sen Gupta, economist at IDFC First Bank Ltd. “Services inflation which is determined more by domestic factors is likely to stay firm as consumption rotates from goods to services.”

High prices may sour demand and risk denting growth as companies pass on costs to consumers.

For now, firms are able to secure new orders despite charging more for their services, as shown by purchasing managers’ surveys.

Good monsoon rains give hope for moderation in food prices and stoking rural demand, Finance Minister Nirmala Sitharaman said in a briefing after the data were released, according to the Mint newspaper, although she added that a “pointed attack” on inflation will need to continue.

“I see monsoon being favorable to agriculture,” the minister said. “Production will be good and rural demand will remain intact.”

Industrial output rose to a one-year high of 19.6 percent in May from a year ago, data released separately by the Statistics Ministry showed. That was lower than the survey estimate of a 20.8 percent increase.

Wholesale price inflation, which surged to 15.88 percent in May, is projected to ease to 15.63 percent in June data due Thursday, according to a separate Bloomberg survey.

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