India’s June inflation hits eight-month high but rate cut still possible

India’s retail inflation hit a eight-month high in June on higher food prices, but stayed below the central bank’s target, potentially giving it room for a further interest rate easing to boost slowing growth.

Annual retail inflation in June was 3.18 percent, up from 3.05 percent the previous month, but below analyst forecasts, government data showed on Friday.

A Reuters poll had predicted retail inflation at 3.20 percent for June.

Core consumer inflation, which strips out food and fuel prices, was estimated at an annual 4.09-4.11 percent in June, marginally lower than May’s 4.1-4.2 percent, according to three analysts after seeing the inflation figures released on Friday.

“Food inflation trend is upwards while core is downwards, so the overall outlook on inflation is benign. The RBI will continue to maintain its accommodative stance and could do another 25-50 basis points rate cuts in this financial year,” said Sujan Hajra, chief economist at Anand Rathi Securities.

Inflation has come down sharply from a peak of more than 12 percent in 2013, and was below the Reserve Bank of India’s (RBI) 4 percent target for the eleventh consecutive month. Comforted by subdued price pressures but concerned about faltering growth, the RBI has cut its policy rate three times since February.

In the most recent reduction last month, the RBI lowered its repo rate by 25 basis points to 5.75 percent and changed its policy stance to “accommodative” to meet the needs of the economy and a banking system laden with bad debt.