Finance

July Retail Inflation Hardens to 2.36% Amid Rise in Food Prices

July Retail Inflation Hardens to 2.36% Amid Rise in Food Prices

The doubling in the rate of inflation in July, the first month of the Goods and Services Tax (GST) rollout, was mainly on account of turnaround in prices of food articles, especially vegetables.

The data on a YoY basis, showed that cereals prices in July edged higher by 3.97 per cent, and meat and fish recorded a sharp rise of 3.19 per cent.

Consumer price inflation for the urban areas stood at 2.17 per cent in July 2017 against 1.41 per cent in June 2017 and 5.39 per cent in July 2016.

Inflation will inevitably remain an important focus given the impact on Bank of England policy and market expectations.

"It seems unlikely we will see an interest rate hike anytime soon, as ongoing concerns over the UK's Brexit negotiating position compounded by a slowing domestic economy weigh on both business and consumer confidence", said Jake Trask, FX research director at OFX. "This, along with forthcoming festive season demand and expected improvement in rural incomes, should help propel consumption and thus investment sentiment", Patel said.

In terms of food prices, the wholesale inflation rate for onion was lower year-on-year by (-) 9.50 per cent, while that for potatoes plunged by (-) 42.45 per cent. Inflation, which hit 2.9 percent in May, was barely positive when Britons cast their votes in the June 2016 referendum. But the RPI measure of inflation accelerated on the month, rising to 3.6 percent year-on-year in July, which signifies that the RPI-CPI wedge broadened out to 1 percentage point.

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The price of sugar and confectionery items went up by 8.27 per cent in July while pan, tobacco and intoxicants turned dearer by 6.39 per cent.

Living standards in Britain will stay squeezed, economists warn, as data out this week is expected to show inflation resumed its upwards march in July.

Food prices of pulses, potatoes and onions experienced a free fall as a result of a supply glut.

The Office for National Statistics, which compiled the inflation data, said there were reports that businesses were taking out measures to protect against the impact of exchange rate inflation rather than pass on cost increases to customers.

The retail prices index, used by rail carriers to set fares this month, rose 3.6 percent on the year, up from 3.5 percent in June.

Reserve Bank of India (RBI), which cut its key policy rate by 0.25% in this month after resisting calls for a reduction in four consecutive monetary policy reviews by citing uncertainty on the future trajectory of inflation due to several uncertainties.