May inflation jumps to 7.5% vs 7.23% MoM

Moneycontrol Bureau

The most awaited data of the week is out. Inflation in May has gone up to 7.55% which is almost at par with street expectations. A CNBC-TV18 poll expected the May wholesale price index (WPI) at 7.4% versus 7.23% in April. Core inflation number has come in at 4.99%, which gives enough reason for the market to expect a rate cut.

The Reserve Bank of India is closely watching the inflation data which will heavily determine its monetary policy stance on June 18.

Overall food inflation rose to 10.74% in May, from 10.49% in the previous month. Food articles have 14.3% share in the WPI basket. Potatoes turned costlier by 68.10% during May on annual basis. For April, the rate of price rise was 53.44%. Besides, pulses and wheat turned expensive by 16.61% and 6.81% respectively.

However, vegetables inflation was lower at 49.43% in May. In April, the rate of price rise was 61%.

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Besides, eggs, meat and fish prices rose 17.89% during the month, slightly higher than 17.54% in April, the official data released today showed. Inflation in milk was 11.90%, while rice and cereals turned costlier by 5.07% and 5.73% respectively.

Onion prices declined (-)7.23% in May. The rate of decline was (-)12.11%  in April.Non-food manufactured inflation showed some easing and was 5.02% in May. It was 5.12 per cent in April.

The headline inflation number for March was revised upwards to 7.69%, from the provisional estimate of 6.89%.

Three important things saw a rise in prices in the last month. This includes power tariffs rise in Tamil Nadu. Although this happened in April, it was not factored in the April index. Petrol prices were raised in the last few days of May. Iron ore prices were also raised by NMDC.

Here is a sneak peak:

• May manufactured products inflation At 5.02%
• March WPI inflation revised to 7.69% vs 6.89% (prov)
• May primary articles inflation at 10.88% vs 9.71% (MoM)
• May food articles inflation at 10.74% vs 10.49% (MoM)
• May fuel group inflation at 11.53% VS 11.03% (MoM)

Rate cut or not?

Today's number has diminished the chance of a rate cut, says Dipan Mehta, member BSE,NSE. He said the equity market will now react to Greece and other global actions. But HDFC Bank chief economist Abheek Barua believes a rate cut is coming. "A case for rate cut has been built on the back of GDP and IIP numbers as well. May inflation numbers just add to the case," he said.

(With inputs from PTI)