Moderation In CPI Inflation To 5.6% In July To Quell Anxiety About Immediacy Of Rate Hikes: ICRA

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ICRA Research Report

The headline consumer price index inflation moderated considerably to a lower-than-expected 5.6% on a YoY basis in July 2021 (our expectation: up 5.9%) from 6.3% in June 2021, receding below the upper threshold of the Monetary Policy Committee’s 2-6% medium term target after a gap of two months.

The decline in the YoY CPI inflation in July 2021 relative to June 2021 was partly driven by a base-effect led cooling in the inflation for food and beverages and miscellaneous items, and a mild easing in the inflation for fuel and light.

While this moderation will reduce the anxiety about the immediacy with which rates need to be hiked, the CPI inflation is nevertheless expected to remain sticky in the range of 5-6% during Q2-Q4 FY22.

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