Clamour for rate cut to grow as inflation cools

Clamour for rate cut to grow as inflation cools

Clamour for rate cut to grow as inflation cools

India’s consumer inflation is expected to have slowed to a record-low in June, pressured by a sharp drop in food and oil prices, a Reuters poll showed, a result that could intensify calls for an interest rate cut.

Consumer price inflation is predicted to cool to 1.70% in June, easing further from May's 2.18%, according to the poll of more than 30 economists taken over the past week.

If realised, it would be the lowest level since the series began in 2012, and below the Reserve Bank of India’s (RBI) medium-term target of 4% for an eighth successive month. Core inflation, however, has remained stubbornly above 4% since at least 2015.

Forecasts for the headline figure ranged from 1.2% to 2.7%. The data will be released on July 12 at 1200 GMT.

“Inflation is expected to take a downturn on account of deflationary pressures witnessed in vegetables and pulses amid slowdown in fuel prices,” said Himanshu Varshney, research analyst at AK Capital.

Food and beverage price index, which accounts for nearly half the consumer price index basket, is forecast to contract 1.05% in May, a significant turn from a peak in July last year when it rose 8.35%.

The India Meteorological Department (IMD) said last week that the nation’s cumulative rainfall between June 1 and July 2, was 6% above the long-run average.

Monsoon showers, which deliver about 70% of India’s annual rainfall, help drive higher food and grain production, keeping inflation in check.

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