June Retail Inflation

Well, well, well, it seems like retail inflation for June 2023 decided to spice things up and come in at a higher-than-expected 4.8 percent. Looks like it wanted to make a grand entrance and show off its inflationary prowess, leaving May's 4.3 percent in the dust. And just like a fearless acrobat, the jump defied gravity, soaring even higher than the impressive base it had in June last year.

Ah, the rise, like a master chef, was primarily orchestrated by the mischievous culprit known as food inflation. Well, it seems like retail food inflation decided to spice things up a bit! Going from a modest 2.96 percent to a bolder 4.49 percent in just one month. Looks like our groceries are getting a taste for the finer things in life! Ah, the year-on-year measure, always trying to downplay the true drama of food inflation. But fear not, for the month-on-month inflation is here to reveal the full magnitude of this culinary catastrophe.

Well, well, well, looks like our food prices decided to take a little joyride this month. They couldn't resist showing off their fancy moves with a 2.5 percent increase. But hold on to your salad forks, because the real superstar of the show is none other than our beloved vegetables, strutting their stuff with a whopping 12.2 percent jump in just one month. Talk about making an entrance! Well, it seems like tomatoes decided to take a leap of faith and skyrocket their prices by a whopping 64.5 percent in just one month. Talk about a tomato power move! Well, it seems like pulses decided to do a little price hike of 3.4 percent, while eggs thought they could one-up them with a 5.5 percent increase. Talk about a competition in the grocery aisle!

Oh, brace yourself for another month of food prices soaring like a gourmet rocket! It seems like the trend of emptying our wallets at the grocery store is here to stay. According to a cheeky little note by Barclays' very own chief economist, Rahul Bajoria, it seems we're in for a wild ride with July's CPI inflation, expected to be a sizzling 5.5% year-on-year. Brace yourselves, folks, because it's those pesky perishable food prices that are causing all the mischief.

Ah, the conundrum of exorbitant food prices! They have become the unruly culprits behind India's inflation expectations, much to the chagrin of the ever-vigilant RBI. Alas, the central bank shall refrain from raising rates, despite the pesky matter of inflated food prices. You see, they had the foresight to expect such a predicament.

Well, it seems the RBI has put on their forecasting hat and predicted that retail inflation will be strutting in at a cool 4.6 percent for the April-June 2023 quarter. Let's hope their crystal ball is as stylish as their predictions! Well, it seems like inflation couldn't make up its mind in the past few months. It went from 4.7 percent to 4.3 percent, only to jump back up to 4.8 percent. Talk about a rollercoaster ride! But hey, at least we can say the average inflation rate was a solid 4.6 percent. Consistency is overrated anyway, right? And lo and behold, the crystal ball has foretold that retail inflation shall rise like a phoenix to a staggering 5.2 percent in the glorious days of July-September. Brace yourselves, for the price tags shall dance with glee!

Ah, the elusive monsoon, the master of mischief, wreaking havoc in the north of our fair country. Well, if those crops start misbehaving, we might just end up with some sassy food inflation on our hands. Rest assured, the government will pull out all the stops to ensure that inflation behaves itself leading up to the grand spectacle of the general election. Ah, behold the grand proclamation of the central government! They shall embark on a noble quest to acquire tomatoes from the bountiful surplus states and bestow upon the major consumption centers these precious gems at discounted rates. Furthermore, they have imposed stock limits on pulses, forsooth, to ensure that prices remain within the realm of reason. Truly, a masterful display of governance!

But amidst the inflation data, there's a silver lining - core inflation is gracefully descending, like a well-behaved deflating balloon at a party. Ah, the CMIE's 'Core Core' inflation, the CPI that likes to exclude all the fun stuff like food, fuel, and petrol. In June 2023, it decided to chill out a bit at 5.4 percent, down from its May high of 5.7 percent. Guess even inflation needs a break from time to time.

Core inflation has been on a downward spiral, taking a nosedive each month since January like a fearless skydiver with a penchant for defying gravity. Well, it seems like the PMI readings are playing a different tune, showing that firms have been getting cheeky and raising their selling prices. Ah, but the PMI survey is like a VIP party, only inviting the most prominent firms to join in on the economic fun. Well, it seems that smaller firms missed the memo on having the ability to set prices according to the inflation data.

Ah, while India's lower core inflation is certainly commendable, we can't help but admire the US CPI print for June, which can only be described as downright stunning! Well, well, well, it seems like US Consumer Price inflation decided to put on a little show! With a seasonally adjusted 0.2 percent increase from a month ago and a whopping 3 percent rise from a year ago, it's safe to say that inflation is feeling quite confident. And to top it off, it even managed to outshine those consensus forecasts. Bravo, inflation, bravo! Well, well, well, it seems Lady Luck is starting to favor the possibility of an Immaculate Disinflation or, as some like to call it, a soft landing.

The Fed Funds futures are still crossing their fingers for a 25 basis point hike at this month's Federal Open Market Committee meeting on the 26th. However, the chances of the policy rate going beyond 525-550 basis points have taken a nosedive, like a clumsy acrobat slipping on a banana peel. Move over, "one and done" is the new catchphrase in town! The markets are eagerly anticipating the Fed's first rate cut by next March, like a kid waiting for their birthday cake. Well, well, well, it seems like the odds of the Fed Funds rate hitting the 450-475 point range at the Fed's July 2024 meeting have decided to play a little game of leapfrog. They've hopped up from a measly 21 percent to a slightly more confident 32 percent. Looks like someone's feeling lucky!

The benign CPI print had quite the impact on the markets! It was like a magician's trick - the S&P 500 jumped up, US bond yields took a graceful dive, and the dollar index decided to take a spontaneous vacation. Quite the show! Naturally, the "risk-on" vibe will be like a magnet, attracting more funds to markets like India. It's like a cool kid at a party, everyone wants to hang out with them. Fear not, dear investors in the Indian markets! The return of food inflation may try to rain on our parade, but fret not, for it shall be no match for the mighty offsetting powers that lie within our midst.