A higher-than-expected India inflation reading in June has prompted some economists to raise their forecasts for consumer price gains for the year, cementing expectations the central bank will take more time to pivot to rate cuts.

Barclays Bank Plc sees the consumer price inflation averaging 5% in the fiscal year that ends March 2024, up from 4.7% earlier. Yes Bank has revised its estimated to 5.3%, while Emkay Global Financial Services sees it at 5.2%. The projections take the number closer to the upper end of the Reserve Bank of India’s 2%-6% target band.

Surging prices of vegetables and pulses pushed up inflation to a three-month high of 4.81% last month, ending four months of moderation. The outcome was predicted by only one of the 35 economists surveyed by Bloomberg.

Read: Surging Food Prices Push Up India Inflation to 3-Month High

“The recent spike in food prices may caution the RBI, but we expect it to stay on hold for an extended period, without dropping its guard on inflation,” Barclays economists led by Rahul Bajoria wrote in a research report. “We are now tracking July CPI inflation at 5.5%, with perishable food prices the key upside risk.”

In comparison, the RBI’s inflation forecast is 5.1% for the year. The central bank paused from rate tightening in April as inflation showed signs of easing, but wants it firmly under control before switching to rate cuts to support growth.

Emkay economist Madhavi Arora said there’s little the “RBI can do in the food supply management but this adds pressure on them to stay vigilant on domestic dynamics.” Yes Bank economists Indranil Pan and Deepthi Mathew echoed similar views, saying “the pressure on vegetable and pulses prices can continue due to the uneven monsoons.”

What Bloomberg Economics Says...

“Our base case remains inflation averaging just 5.2% in fiscal 2024, significantly lower than the 6.7% reported in fiscal 2023. That decline will likely be the result of lower commodity prices and lagged impacts from RBI rate hikes. But we see risks to this outlook as tilted to the upside.”

— Abhishek Gupta, India economist

Read the full report here.