New Delhi, July 21 -- The inflation monster isn't dead yet.

Headline inflation may have stayed below the Reserve Bank of India's (RBI) medium-term target of 4% since February, but a small yet persistent red flag has emerged: rising core inflation.

As headline inflation eased, the RBI responded with an outsized repo rate cut last month. Markets welcomed both the low inflation prints and the rate cut-yields have declined meaningfully across instruments and tenors. June's benign inflation print of 2.1% has even raised hopes of a downward revision in the RBI's full-year inflation forecast of 3.7%. Yet, in parallel, core inflation, which excludes food and fuel, has ticked up from 3.6% to 4.5% between January and June.

The RBI's mandate is t...