Inflation Leaps To 6.95% In March On Soaring Food Item Prices

For the month of March, inflation came in at 6.95% as against 6.07% in the earlier month due to the increase in the food item prices. For the third straight month, inflation has been posted more than the RBI's upper end of tolerance target.

Inflation Leaps To 6.95% In March On Soaring Food Item Prices

The food inflation in the month of March has been recorded at 7.68% as against 5.85% in February.

"The CPI inflation shot up well beyond our expectations, touching a 17-month high of 6.95% in March 2022, led predominantly by a sharper than anticipated surge in some components of food and beverages such as meat and fish. Most other components printed broadly in line with our forecasts, suggesting that a gradual pass through of the commodity price pressures has commenced," Aditi Nayar, chief economist, ICRA said.

The RBI has the target of maintaining medium term inflation at 4% with a upper and lower tolerance band limit of 6% and 2%, respectively.

"With the MPC having signalled an imminent stance change, the rate hike cycle may begin as early as June 2022, if the next CPI inflation print doesn't significantly cool off from the March 2022 level. We now expect to see 50-75 bps of rate hikes by the end of Q2 FY2023, followed by a pause in H2 FY2023, and perhaps another 50 bps of hikes in FY2024," Nayar added.

In a case inflation does not cools off for the coming month then the RBI will have no option but to raise interest rates in the RBI June MPC meet.

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