India’s July inflation eases

NEW DELHI: India´s retail inflation rate eased in July, strengthening views that the central bank will keep interest rates on hold at its review in October after raising them for a second straight meeting on Aug. 1. In July, consumer prices rose 4.17 percent from a year earlier, compared with a downwardly revised 4.92 percent in June, the Statistics Ministry said on Monday.

The median forecast of economists polled by Reuters for July was 4.51 percent, with estimates ranging from 3.75 percent to 5.40 percent. Rupa Rege Nitsure, chief economist at L&T Finance Holdings, said retail inflation significantly slowed due to smaller increases in food prices and housing.

"I expect the RBI (Reserve Bank of India) to take a pause until December at least. However, rupee depreciation remains a major risk to inflation besides the sticky core inflation," she said.

July was the ninth straight month in which inflation was higher than the RBI´s medium-term target of 4 percent. The RBI has raised its benchmark rate by a total of 50 basis points at its past two meetings, to 6.5 percent, while warning about inflationary pressures. The RBI´s next policy decision is on Oct. 5. The falling rupee , which has so far lost over 8 percent this year, has pushed up prices of imported items such as petroleum products, commodities, electronics and engineering equipment.

On Monday, the rupee touched an all-time low of 69.95 against the dollar on concerns about contagion from Turkey spilling over to other emerging markets. The International Monetary Fund, in its annual report on India last week, warned that average inflation is likely to rise to 5.2 percent in the 2018/19 fiscal year from a 17-year low of 3.6 percent in the previous fiscal year. The IMF expects the central bank to gradually tighten monetary policy in order to tame inflation.