The world is battling high inflation, and India is no different. After rising to above 7% in May, India’s consumer price inflation print again stayed above that level in June at 7.01%. This is well above the Reserve Bank of India’s Monetary Policy Committee’s tolerance limit of 6%. The slight drop in June’s inflation level was due to a fall in edible oil prices. 

Inflation in food and beverages, which has the largest weightage (45.9%) in the CPI basket, fell marginally (28 basis points to 7.56%) as a result of the fall in edible oil prices. As a result CPI as a whole fell marginally MoM in June. 

The other major contributors to CPI like fuel, clothing and footwear, and housing continued to rise. Fuel and lighting inflation rose by more than 10% in June, after dipping to 9.54% in May. This shows that energy costs remain high for consumers. Consumers will be hoping that the recent fall in crude oil prices will ease some of this pain in the coming months. 

Overall however, the June CPI number was slightly lower than the estimated 7.1%. This has led Citigroup and Barclays to project a smaller interest rate hike from RBI in their MPC meet in August, with both predicting a 35 bps increase. 

A Reuters poll ahead of the June CPI data release had economists predicting that inflation will persist into the second half of the year. Once the wholesale price index (WPI), or inflation at factory gate is released later in the week, investors will be able to assess how pervasive this phenomenon might be.