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of this, 7.7pp is due to imported inflation

* Wholesale Price Index (WPI)-based inflation came in lower at 13.9% YoY in Jul’22 as against 15.2% YoY a month ago but higher than 11.6% YoY in Jul’21. This was slightly above Bloomberg consensus of 13.7% YoY.

* Internals suggest that ~55% (7.7pp) of headline WPI inflation in Jul’22 was caused by imported inflation, similar to the contribution in Jun’22. Lower headline WPI was largely on account of six-month low imported inflation (41% weight in WPI basket) of 19.9% YoY in Jul’22. Moreover, domestically generated WPI inflation too came in at a three-month low of 10.1% YoY in Jul’22 v/s 11.5% YoY a month ago.

* WPI food inflation was at a three-month low of 9.4% YoY in Jul’22 as against 11.9% YoY a month ago due to lower inflation in both primary food articles and manufactured food items.

* WPI inflation in ‘primary articles’ came in lower at 15% YoY in Jul’22 (v/s 19.2% YoY in Jun’22) but that in ‘fuel and power’ came in higher at 43.7% YoY in Jul’22 (v/s 40.4% YoY in Jun’22). WPI inflation in ‘manufactured products’ came in at 8.2% YoY in Jul’22 (v/s 9.2% YoY in Jun’22).

* Additionally, core WPI (non-food manufactured products) inflation also came in at a 16-month low of 8.4% YoY in Jul’22 (v/s 9.34% YoY in Jun’22).

* Overall, imported inflation is still causing more than half of WPI inflation. However, slowing down of both CPI and WPI inflation in Jul’22 is definitely good news. Overall, we expect CPI (monetary policy anchor) to ease towards 6.0%/5.5% by 4QFY23/Mar’23, respectively. Hence, we continue to expect that the RBI will hike repo rate by another 50-60bp by Dec’22.

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