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Inflation: May retail inflation hits 4-month peak of 4.87% on hardening fuel, food prices

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NEW DELHI: Inflation based on consumer price index (CPI), also known as retail inflation, for the month of May spiked to 4.87 per cent, government data showed on Tuesday.

Retail inflation now stands at a four-month high after topping the 4.58 per cent it recorded in April. This is now the seventh straight month that inflation has breached the Reserve Bank of India’s (RBI) comfort zone — its mid-term target of capping it at 4 per cent.

The spike in inflation came on back of fuel prices after global oil prices hit a 3-1/2-year high last month, led by increasing worries of supply constraints from US President Donald Trump’s decision to withdraw from the 2015 Iran nuclear agreement.

“Rising crude prices would not only impact headline inflation but would also put pressure on price levels as the twin deficit goes up,” noted Kunal Kundu, an economist at Societe Generale ahead of the data, referring to India’s budget and current account gaps.

The RBI in its bid to tighten inflation, increased repo rate last week, for the first time in more than four years. The central bank however, kept its “neutral” policy stance unchanged.

A Reuters poll of economists which predicted the inflation to come at 4.83 per cent, also suggested more policy tightening from RBI in the coming months.

Another set of data released by the government showed that the industrial output or IIP has increased to 4.9 per cent in April from a year earlier.

Updated: June 12, 2018 — 5:19 pm

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