Highlights

  • CPI in India has been above 6% for 3 straight months
  • Edible oil, petrol, diesel prices all at record high

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RBI has hiked the repo rate by 40 bps up to 4.40% from 4% earlier.

 

High inflation to inflated EMI payouts, the Reserve Bank of India(RBI) handed out as per the the market reaction could be defined as a death knell for the common man as the central bank shocked with 40 bps rate hike and also warned that times will get a lot tougher.

Inflation in India has been above 6% mark for three months and Governor Shaktikanta Das warned that April's print is not pleasing as well. In fact the inflation condition was escalating to such a level that the RBI held an emergency meeting on May 2 and 4 which led to the the rate hike shock.

Also read/watch| RBI shocks with repo rate hike, CRR hike

Here is what the RBI Governor had to say as he warned of higher food and commodity prices going ahead:

"Looking ahead, food inflation pressures are likely to continue. Food price indices of the Food and Agriculture Organisation (FAO) and the World Bank touched historical highs in March and remain elevated. Spillovers from global wheat shortages are impacting domestic prices, even though domestic supply remains comfortable.

Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war. Elevated feed costs are translating into escalation in poultry, milk and dairy product prices. International crude oil prices continue to hover above US$ 100 per barrel and this is prompting passthrough to domestic pump prices.

The risks of unprecedented input cost pressures translating into yet another round of price increases for processed food, non-food manufactured products and services are now more potent than before. This could strengthen corporate pricing power if margins get squeezed inordinately.

To sum up, the strengthening of inflationary impulses in sync with the persistence of adverse global price shocks poses upward risks to the inflation trajectory"

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