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Ecoscope The Economy Observer : CPI inflation surprises on the upside in July 2017

14-Aug-2017

CPI inflation inched up to 2.4% YoY in July 2017 from 1.5% in the previous month, much higher than our estimate of 1.9% and market consensus of 2%.
The surprise can largely be attributed to a sharp rise in vegetable prices, excluding which, CPI inflation was unchanged at 2.9% YoY in July v/s the preceding month. Core inflation also inched up slightly from 3.8% in June to 4.1% in July.
An adverse base effect is set to kick in from August, which should push up CPI inflation in the near term. Besides, it would also need to be seen whether the surge in vegetable prices is sustainable. While we maintain that there is scope for a rate cut at this juncture, we would closely monitor the August CPI print. We believe the RBI would remain data-dependent

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