Rise in consumer inflation dims easing hopes 13/08/2014

Rise in consumer inflation dims easing hopes
13/08/2014 17:20
India’s consumer inflation accelerated in the month of July as food prices inched higher, dimming any hopes of monetary policy easing by the Reserve Bank of India (RBI) in the near-term, clouding the outlook for Asia’s third biggest economy. Consumer prices climbed by 7.96 per cent in July 2014 from the same month a year ago, above the annual 7.46 per cent rise in June 2014, government data showed on Tuesday. Given that retail inflation is the major focus of the RBI, the central bank is unlikely to soften borrowing costs anytime soon, even as a deficient monsoon threatens to spike up food prices further, the major item in India’s CPI basket. Food inflation accelerated to 9.36 per cent in July against 8.05 per cent in June, the government report said. The RBI is aiming to keep retail inflation at 8 per cent by January 2015 while it is eying an inflation target of 6 per cent by January 2016. The central bank last week maintained its key benchmark rate or the repo rate unchanged at 8 per cent, warning over the upside risks to the inflation target. A slowdown in industrial output growth presents the risks to India’s economic growth. Industrial output growth slowed to 3.4 per cent, year on year in June 2014 from the annual 5 per cent rise in May 2014, signaling a lingering slowdown.