India's inflation pegged to soar to 9.5%

Blame it on rising retail fuel prices.

According to DBS, India's CPI inflation for June could inch up to 9.5% YoY from 9.3% the month before, underpinned by increases in retail fuel prices. 

Here's more from DBS:

The diesel and petrol prices were raised by between 1.0-3.0% in the past month as the oil marketing companies factored in stark rupee depreciation and modest gains in the international fuel prices.

Simultaneously unfavourable weather conditions and supply disruptions likely resulted in higher prices for most vegetables and perishables, thus keeping the pace ofrise in food costs above the 10% mark for the fifteenth consecutive month.

Over to the June WPI inflation, which is due on 15 Jul (Mon), we look forthe headline to stay benign at 4.5% YoY from 4.7% the month before.

On sequential basis, prices have risen by moderate 0.33% MoM average on six month moving average basis since Dec12 and we expect that trend to sustain.

While the pass-through ofthe price increases ofthe administered fuel products is likely to show in the month ahead,the notable risk to the inflation trajectory is the exchange rate depreciation.

The weak rupee has narrowed the extent of benefit through lower international commodity prices and is thereby likely to
come in the way offurtherrate cuts.

In sum, building in the firm retail inflation print, weak currency and tentative stabilisation in the factory outputtrends, the
RBI is likely to extend its pause-stance on the ratesfront.