Retail inflation for May 2013 came at a higher than expected 9.31 per cent, dashing hopes of a RBI policy rate cut on Monday.

The consumer price index (CPI) based inflation for May was, however, lower than the retail inflation print of 9.39 per cent in April 2013.

For May 2013, retail inflation in both rural and urban areas saw a decline on a sequential basis.

While retail inflation in rural areas came down to 8.98 per cent (9.16 per cent in April 2013), in the case of urban areas it was 9.65 per cent (9.73 per cent).

The higher-than-expected retail inflation print for May will compel the RBI to keep the policy rates unchanged on Monday, say many economists.

There is also the added issue of depreciation in the rupee against the dollar, which would tie the hands of the central bank.

At best, there may be a 25 basis point cut, say some economists who believe that a policy rate cut on Monday is still a possibility.

(This article was published on June 12, 2013)
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