Bets on early rate cut off as inflation flares up in June

Inflation may average 5-5.4% in the current financial year, higher than earlier estimates

- Shayan Ghosh

The surprise surge in retail inflation for June has prompted economists to raise their forecast for July amid firming vegetable prices, dashing hopes of a rate cut anytime soon.

Inflation measured on the Consumer Price Index (CPI) came in at 4.81% in June, higher than 4.6% predicted by Mint poll of 19 economists, led by food inflation. After the June price rise data was released, economists now believe inflation could average 5-5.4% in the current fiscal year, higher than their previous estimates. The monetary policy committee (MPC) of the Reserve Bank of India (RBI) forecast inflation at 5.1% in 2023-24. To be sure, inflation averaged 4.6% in the June quarter, the same as what the central bank forecast. Inflation stood at 4.3% in May, a near 25-month low.