The RBI Insists Inflation Is Transitory. Is It?

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Retail inflation rose by 6.26% in it’s latest print for June 2021.

That’s both good and bad news.

CPI inflation declined by four basis points in June after rising to 6.3% in May — the highest in 2021. But, it continued to remain above the Monetary Policy Committee’s target of 4(+/-2)% for the second straight month. This was after it already spent 10 of the 12 months in 2020 outside the target band.

In June, despite the marginal downtick in inflation, three of the six major components of the inflation basket remained above the upper band of 6%. While fuel and light inflation saw a spike in April, May and June, the group comprising miscellaneous items has remained at over 6% through the year. Clothing and footwear inflation rose for the third straight month to exceed the upper band in June. Food and beverage inflation rose for the third straight month and is now within striking distance of the upper band.

Inflation in pan, tobacco and intoxicants saw a sharp dip in June after recording double-digit inflation for all the previous months in the year. Housing remained the only group to record consistently low inflation through the year. Health inflation eased but remained elevated.

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