New Delhi, May 26: Fuel price hikes and higher import duties on gold and silver could push retail inflation to 5 per cent by June, but the RBI will wait and watch till the impact of fuel price hike settles in before tightening interest rates in the second half of the fiscal year, economists said.
Over a period of 11 days, starting May 15, petrol prices have been increased by Rs 7.38/ltr and diesel prices by Rs 7.48/ltr with some inter-city variation. These price hikes will directly cascade into impacting prices in sectors where petrol and diesel are used as inputs such as transport and storage and to some extent electricity.
Besides, the government on May 13 had hiked import duty on gold and silver to 15 per cent to curb non-essential imports.
“After an overall increase averaging about Rs 7.5/ltr in petroleum products, CPI inflation would go up by about 75 basis points. In May 2026, CPI inflation may thus be in the range of 4-4.5 per cent and June CPI may be in the range of 4.5-5 per cent,” EY India Chief Policy Advisor D K Srivastava told PTI.
The CPI inflation data for May is scheduled to be released on June 12.
“Since the increase in CPI is cost driven, adjustments in repo rate may have limited effect in containing inflation. RBI may like to wait until the fuel price hike settles down and examine its impact over a quarter before taking a decision. However, If CPI inflation crosses the level of 5 per cent and shows upward momentum, RBI may start tightening interest rates,” Srivastava said. (PTI)
