Ahead of inflation data, understanding how CPI is linked to RBI and markets

The Reserve Bank of India (RBI) hiked the benchmark interest rate, or repo rate, in May and then in June to control demand and liquidity in the economy, bringing CPI down

India will on Tuesday release its June data consumer price index (CPI) or retail inflation, which was at 7.04 per cent in May. The Reserve Bank of India (RBI) hiked the benchmark interest rate, or repo rate, in May and then in June to control demand and liquidity in the economy. After the hike, inflation eased to 7.04 per cent from an 8-year high of 7.79 per cent in April.

The repo rate--at which the RBI grants loans to the commercial banks against government securities--was hiked by 40 basis points in May after two years of pause. Currently it stands