Consumer Price Inflation for May 2015 rose to 5%, rising suddenly after two months of a drop.
Components showed rising inflation in:
- Fuel (we saw two retail fuel price increases in May, and guessed this last month)
- Education, Medical costs
- Consumption: Personal Care and Household Items
Food remains benign on the inflation front and here the only fear is of a bad monsoon.
There has been an uptick in Rural and Urban inflation.
“Core Inflation” has risen after a long time
If you take out the impact of food and fuel, the inflation index has risen suddenly:
Our View
While inflation has gone up, we don’t think this is a big deal just yet because the next few months have seen a sudden move up last year on the index.
However the rise in “core” inflation is surprising. In any case, RBI isn’t going to drop rates for a few months at least. They will probably have rising inflation to add to their woes.
Overall, this is a “so-so” report – the only fear is the “Core” piece here.
