India's retail inflation accelerates to 4.87% in May: Reports

India's retail inflation rate accelerated to a four-month high of 4.87 per cent in May, government data showed on Tuesday, driven by higher fuel prices and a depreciating rupee.

Analysts polled by Reuters had forecast May's annual increase in the consumer price index at 4.83 per cent, compared with April's provisional 4.58 per cent. The forecast for May ranged from 4.1 per cent to 5.7 per cent.

India's retail inflation jumped further in May to a four-month high, primarily driven by a surge in energy prices, according to the Reuters poll, suggesting more policy tightening from the central bank is coming.

A Prasanna, Chief Economist, ICICI Securities Primary Dealership

"Both headline and core inflation are in line with our expectations. Although both these measures may peak in the next reading, core may turn out to be sticky around 5 per cent.

"Headline inflation could also remain around 5 per cent by March 2019, and could potentially edge higher depending on MSP decision by the government. Accordingly, we expect the Monetary Policy Committee to hike policy rates by 25 bps by October."

Shilan Shah, Senior India Economist, Capital Economics

"Predicting the exact path of headline inflation is difficult given the volatile nature of food and fuel prices. However, one thing that does look likely is that the core inflation will stay elevated. Even if the economy just maintains its current momentum, capacity utilisation would tighten further, which will boost the underlying pressure.

"In terms of what this means for policy, the Reserve Bank of India hiked its repo rate by 25 bps last week, and we think that the rise in inflation last month, as well as the outlook for underlying price pressures, will pave the way for further modest policy tightening over the next six months or so."

Rupa Rege Nitsure, Group Chief Economist, L&T Finance Holdings, Mumbai

"The growth-inflation dynamics have not changed much. The consumer price index has continued its northward journey and core inflation crossing 6 per cent is a warning for the Reserve Bank of India. Future monetary policy actions would depend on the progress of monsoons, oil price movement and fiscal slippage. I expect at least two more rate hikes during FY19."

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, Mumbai

"The August CPI inflation print warrants a cautious stance, though incremental data releases will need to be looked at. We keep our call for another 25 bps rate hike in August, but will be data-dependent as we move closer to the policy meeting.

"Core inflation is likely to remain sticky even though there should be some gradual moderation from the current levels. The pass-through of higher crude prices and rupee depreciation along with structural demand-supply mismatches in some of the components of the core inflation will restrict any downward bias. We expect core inflation in the range of 5.2 per cent to 6.5 per cent for the rest of FY2019."

Tushar Arora, Senior Economist, HDFC Bank, New Delhi

"Inflationary pressures are building up in the economy. Food prices are up after remaining subdued for four consecutive months. Meanwhile, there is pressure because of higher fuel prices as well. Next month's reading for the CPI could be even higher and could breach the Reserve Bank of India's estimated peak of 4.9 per cent for first-half. Thus, the possibility of one more rate hike cannot be ruled out this year."