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Below is Perspective on CPI data for May 2022 by Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd.

“May'22 headline inflation at 7%, in line with our forecast but slightly lower than the market consensus of 7.1%

* Core inflation (ex F&B, F&L and P&T) came in at 3-month low of 6.4% v/s 7.3% in Apr'22 and slightly lower than our forecast of 6.5%.

* Overall, today's data was better than the market consensus and suggest downward bias to RBI's 1QFY23 forecast of 7.5% (7.3% as per our projections). If so, we think a maximum of 25bps rate hike could materialize in Aug'22, after which the RBI should take a pause. Or, the RBI could pause in Aug'22 itself and assess the situation before hiking rates further.

* Nevertheless, inflation is expected to be elevated in FY23, which we expect at 7% v/s RBIs forecast of 6.7%.”

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