Retail inflation spike in May might cause the Reserve Bank of India to ''revisit its focus on growth risks'', global forecasting firm Oxford Economics said on Tuesday adding that a rate hike is still unlikely this year.
'Consumer inflation spiked in May... This may cause the RBI to revisit its focus on growth risks. Still, we think a rate hike is unlikely this year,' Oxford Economics said
Rising prices of edible oils and protein-rich items pushed the retail inflation to a six-month high of 6.3 percent in May, breaching the comfort level of the Reserve Bank and, thus, rendering reduction in interest rates a difficult proposition in the near term.
Headline inflation surged to 6.3 percent year-on-year in May, from 4.2 percent in April as inflation rose across the board. Food inflation increased to 5 percent in May from 2 percent in the previous month. Fuel inflation grew 11.6 percent after rising to 8 percent in April. Core inflation jumped to 6.1 percent from 5.2 percent in the previous month.
Wholesale price-based inflation also accelerated to a record 12.94 percent in May on account of rising prices of crude oil, manufactured goods and the low base of last year due to the COVID-19 lockdown.