DNA Money Edit: The curious case of retail inflation

Retail inflation has taken a curious turn once again. The consumer price index (CPI)-based inflation has jumped to 4.9% in May from 4.6% in the previous month, with fuel and food inflation being the main drivers. The spurt has given an impression that the June 2018 inflation number may breach the first-half inflation forecast of 4.8%-4.9% by the Reserve Bank of India (RBI).

Inflation of transport and communication jumped to 5.3%, up from 4.5% in April, while fuel and light moved up to 5.8% from 5.2%. As per the Central Statistics Office, fruit prices grew at a faster pace of 12.33% as against 9.65% in April while vegetables were costlier by 8.04%, up from 7.29% in the previous month.

Earlier this month, the central bank raised the repo rate by 0.25% to 6.25% in its latest monetary policy review, making it the first hike under Modi's regime, thanks to concerns over rising inflation.

Going forward, the farmers' strike in various parts of the country may kick up the June inflation number, while moderation in crude oil prices and relative stable currency, along with the strong base effect, may provide some respite. The progress of monsoon rains will also play an important role.