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Retail inflation fell to 6.71% in July, the lowest since March


Retail price inflation fell to below 7% in July, held above RBI target for seven months

Retail price inflation declined to 6.71% in July, the lowest since March, but above the upper limit of the Reserve Bank of India’s target range for seven consecutive months.

In June, inflation remained above 7% for the third consecutive month, at 7.01% compared to a year ago.

Last month, easing food prices – which make up nearly half of the consumer price index basket – and fuel costs helped slow the pace of rising price pressures.

Most of the slowdown stemmed from recession fears, which drove down global commodity prices, with international oil benchmark Brent down around 9% for the month, hitting pre-Central lows. Ukrainian crisis and below 100 dollars a barrel.

This slowdown is also due to the delayed reflection of the fuel tax reduction. Government interventions to reduce import duties and restrictions on wheat exports have also helped.

Nonetheless, consumer price increases are expected to persist at a robust pace in the coming months, with RBI projections indicating that inflation will remain above its upper end of the 2-6% target range.

The near-term inflation outlook is still quite uncertain as the government’s efforts to contain consumer price inflation may be less effective due to erratic rainfall this year and weak

The government has mandated the central bank to keep retail price inflation at 4%, with a tolerance level of plus or minus 2% of that rate, which is 2-6%.

With the outlook for inflation elevated, the RBI was forced to raise its key repo rate for the first time in four years, raising it by 40 basis points (bps) at an off-cycle meeting in May, a follow-on increase of 50 basis points. in June, and another 50 basis points higher than expected this month, bringing the repo rate to 5.40%.

The repo rate is the rate at which RBI lends money to commercial banks and the latest inflation data suggests that interest rates are likely to continue to rise.

Separately, data from the Office for National Statistics (ONS) showed on Friday that industrial production increased by 12.3% in June 2022.

Industrial production was hit due to the coronavirus pandemic in March 2020, when it contracted by 18.7%.

It decreased by 57.3% in April 2020 due to a decline in economic activities following the lockdown imposed to curb the spread of coronavirus infections.

But started to recover this year.

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