GBP/INR is on hold at the end of the week, after two bullish sessions. Currently, one British pound buys 97.697 Indian rupees, down 0.03%. The pair is facing more resistance as it tries to get closer to the psychological level of 98.000.
The rupee has recovered slightly on Indian retail inflation data. The Reserve Bank of India (RBI) reported yesterday that inflation accelerated for the fourth straight month in July, to 6.93%, citing a further increase in food prices. The indicator has exceeded the central bank’s inflation target of 6%. This might make it difficult for it to lower the interest rates in an effort to support the economy amid the pandemic.
Last week, the RBI’s monetary policy committee (MPC) left the rates unchanged, pointing to a potential increase in food prices.
India’s consumer price index (CPI) has maintained above 6% since April. In July of last year, it was half that figure.
Aditi Nayar, a senior economist at rating firm ICRA, said that a rate cut from the central bank might be delayed from October to December or February next year.
Economists argue that the higher inflation is caused by the supply-side disruptions amid the coronavirus pandemic rather than being led by the demand side. India Ratings chief economist Devendra Kumar Pant commented:
“Inflation increase of some of these commodities at a time of depressed demand is perplexing, which suggests the inflation increase is mainly due to supply disruption, not due to demand pressure.”
Food inflation surged 9.62% in July, led by vegetables, spices, pulses, and meat and fish. The food inflation reading for June was revised upwards from 7.87% to 8.72%. Inflation for meat and fish, pulses and products, and vegetables was 18.81%, 15.92%, and 11.29%, respectively in July.
Wholesale Inflation Drops in July
Earlier today, India’s commerce and industry ministry said that wholesale price-based inflation had dropped 0.58% last month, even as prices of foods surged.
“The annual rate of inflation, based on monthly WPI (Wholesale Price Index), stood at (- 0.58 per cent) (provisional) for the month of July, 2020 as compared to 1.17 per cent during the corresponding month of the previous year,” the ministry said.