In May, consumer prices rose by a lower than expected 0.15%, versus market expectations of around 0.4%, thanks to a somewhat deeper drop in food prices and a softer increase in transportation prices (Table 1). But because of last year's low base, the 12-month CPI inflation nevertheless edged up to 6.5% from 6.1% a month earlier, as food inflation continued to hover at little over 7%.
Looking beyond the headline, inflation indicators do not look particularly benign, just like it was the case in April.The favored I-index has edged up to 5.6% from 5.4% a month earlier, y/y, and continues to run at a seasonally-adjusted annualized rate of around 6%, by our calculations. Service inflation does not look benign either, with several service sub-indices deteriorating compared to the same month of the previous year, attesting to the inertial nature of inflation dynamics, in our view (Graphs 1-4).
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