Retail inflation falls to 6.71% in July, above RBI's upper band for seventh straight month

Consumer price-based or retail inflation slipped in July to 6.71 per cent as against 7.01 per cent recorded in June, government data showed on Friday. However, the figure stayed above the Reserve Bank of India's (RBI's) upper tolerance range of 6 per cent for the seventh straight month.

In July 2022, inflation in the food basket fell to 6.75 per cent from 7.75 per cent in the preceding month, as per the National Statistical Office (NSO) data.

"CPI headline inflation for July has moderated in line with our expectations, led largely by food inflation, while the core inflation remains elevated and sticky. The coming few readings are expected to be a tad above 7 per cent with inflation likely to hover above RBI's upper threshold limit of 6 per cent until January 2023. We expect repo rate at 6 per cent by end of 2022, followed by a pause and a shift to neutral policy stance," Upasna Bhardwaj, chief economist, Kotak Mahindra Bank, Mumbai, told news agency Reuters.

RBI has raised interest rates by 140 basis points (bps) so far this year to 5.40 per cent and may add more in the coming months. RBI Governor Shaktikanta Das said that inflation may not fall within the top end of its mandated target band until December this year.

The Reserve Bank factors in the retail inflation print while arriving at its bi-monthly monetary policy outcome.

The Centre has tasked RBI to ensure inflation remains at 4 per cent with a margin of 2 per cent on either side.

Another set of government data released today showed that industrial production registered a growth if 12.3 per cent in June 2022 from a year ago period.