BofA expects India's July CPI inflation to hold at 4.4%

Investing.com -- Bank of America expects India's headline inflation to remain flat at around 4.4% year-over-year in July, matching June's rate, according to a report released this week. The month-over-month increase is projected at 0.8%.

The bank said inflation will continue to stay above the 4% target, primarily due to normalizing food prices at 5.2% year-over-year in July and lagged effects from higher fuel prices. The refrigerated food price index for July is expected to rise to 7.5% year-over-year.

Core inflation is likely to stay in check as lower gold prices offset probable increases in restaurants and education services, the bank said.

The Reserve Bank of India delivered a relatively dovish monetary policy Tuesday, lowering its headline CPI forecast by 10 basis points to 5% for fiscal year 2027. The correction in core inflation was larger, down 40 basis points to 4.3% year-over-year.

Food inflation is expected to continue normalizing in July at 5.2% year-over-year compared to 5.1% in June as vegetables, eggs, and meat prices increase. Overall food inflation is likely to rise 1.9% month-over-month on a non-seasonally adjusted basis.

Vegetables and fruits saw continued momentum in July at 2% month-over-month and 7% month-over-month respectively. Onion prices rose while tomato prices declined. Egg prices also increased in July while seafood and fish prices are expected to taper.

Core inflation, defined as excluding food and fuel, is expected to remain below 3.8% in July versus 3.9% year-over-year in June.

After a dry June with rainfall 40% below normal, precipitation picked up in July with cumulative rainfall at 3% above normal. The season's rains through Aug. 6 stood at 11% below normal. Reservoir storage capacity reached more than 50% of full use, and kharif sowing progressed to 81% of normal area sown through July.

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