India WPI inflation stays above 15% in Jun 22, more rate hikes seen

  • India’s annual wholesale price-based inflation kept above 15% in Jun 22, government data showed, but the slight easing from Jun 22’s three-decade high of 15.88% strengthens prospects for more rate hikes in Aug 22 by the central bank.
  • Wholesale prices, akin to producer prices, eased slightly to 15.18%, but stayed in double digits for a 15th straight month, the data showed.
  • A YTD depreciation of nearly 7% in the rupee against the dollar has pushed up prices of imported food and energy products for companies as well as consumers.
  • Aditi Nayar, chief economist at ICRA, the Indian arm of Moody’s rating agency, said WPI inflation could ease to 13% in Jul 22, reflecting correction in global commodity and fuel prices.
  • “We foresee 60 basis points of rate hikes by the Monetary Policy Committee (MPC) over the next two reviews,” she said, referring to the central bank’s rate-setting panel.
  • The repo rate could rise to 5.5% by Sep 22, followed by a pause to ascertain economic growth momentum, she added.
  • The high inflation was mainly fuelled by rising prices of crude petroleum and natural gas, food items, basic metals and chemical products, the commerce ministry said in a statement.
  • The RBI will meet from 2-4 Aug 22 amid widely-held expectations of rate hikes of 25 to 50 basis points.

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