Inflation has now peaked

Amid the ongoing debate over inflation in a post-pandemic world, one thing that does appear clear is that near-term price pressures in India have peaked. Consumer price inflation held steady in June at 6.3% y/y, while wholesale price inflation dropped for the first time since December. Daily data show that, despite concerns in some states over lower-than-expected monsoon rains, food price inflation has eased further so far in July. And with last year’s rebound in global oil prices now entering the annual comparison, vehicle fuel inflation – which unusually is included in the RBI’s core measure of inflation – is likely to have dropped too. If we are right in thinking that inflation has peaked, the RBI is unlikely to withdraw policy support for a long while yet as it remains firmly focussed on supporting the economic recovery.