India's consumer price index for July, released by the government on the 12th, rose 4.45% from a year earlier, accelerating on the back of higher food prices. The figure was broadly in line with the market forecast of a 4.5% increase and exceeded the central bank's medium-term target of 4% for a second straight month, but remained comfortably within the tolerated range of 2% to 6%. The central bank last week kept its policy rate unchanged and signalled it would wait for upcoming data to assess whether higher oil prices are adding to inflationary pressure. Alexandra Hermann Prasad, lead economist at Oxford Economics, noted that the central bank can afford to be patient for now, but not indefinitely, and expects policymakers to hold off on a rate hike in October before delivering a 25 basis point increase in December. Food inflation rose to 5.52% in July from 5.32% in June, against the backdrop of deficient monsoon rainfall. According to India Ratings and Research, core inflation, which strips out volatile food and fuel prices, came in at 3.9%, below the expected 4.08%.
CPI at 4.45% above 4% target, reducing chance of near-term rate cut, supporting higher yields.
