Inflation at 6-year low as food prices ease – OXBIG NEWS NETWORK-OxBig News Network

Retail inflation dipped to an over six-year low of 2.82 per cent in May due to subdued food prices, remaining below the RBI’s median target of 4 per cent for the fourth consecutive month, according to government data released on Thursday.

Consumer Price Index (CPI)-based retail inflation was 3.16 per cent in April and 4.8 per cent in May 2024. The previous low was in February 2019 at 2.57 per cent.

On easing inflation, the Reserve Bank effected a jumbo rate cut of 50 basis points last week, taking the total to 100 bps since February.

Food inflation was 0.99 per cent in May, significantly lower from 8.69 per cent in the year-ago month, according to the National Statistics Office (NSO) data.

“The significant decline in headline inflation and food inflation during the month of May 2025 is mainly attributed to a decline in inflation of pulses & products, vegetables, fruits, cereals & products, households goods & services, sugar & confectionary and egg and the favourable base effect,” NSO said in a statement.

The food inflation in May 2025 is the lowest since October 2021.

According to NSO data, inflation in rural areas was 2.59 per cent in May, while it was 3.07 per cent in urban India.

Among states and UTs, the highest inflation was recorded in Kerala at 6.46 per cent, followed by Punjab (5.21 per cent), Jammu and Kashmir (4.55 per cent), Haryana (3.67 per cent) and Uttarakhand (3.47 per cent).

The lowest inflation was in Telangana at 0.55 per cent.

The Reserve Bank of India (RBI), which has been tasked by the government to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side, has projected CPI inflation for 2025-26 at 3.7 per cent, with Q1 at 2.9 per cent, Q2 at 3.4 per cent, Q3 at 3.9 per cent, and Q4 at 4.4 per cent.

Commenting on the data, Aditi Nayar, chief economist, ICRA, said CPI inflation cooled further in May 2025 to a 75-month low of 2.8 per cent, led by the food and beverages segment, validating the decision of the Reserve Bank’s Monetary Policy Committee to frontload rate cuts.

The change in the monetary policy stance appears to be a fairly strong signal of a pause, especially when combined with the unexpected CRR cut, she said. “As of now, we expect rates to be unchanged in the August 2025 policy review. Nevertheless, given our lower inflation and growth forecasts vis-a-vis the projections of the MPC, we are not ruling out the possibility of a final 25 bps rate cut in October 2025, by when the monsoon outturn and inflation would be clearer,” Nayar said.

Final RBI rate cut not ruled out: ICRA

“As of now, we expect rates to be unchanged in the August 2025 policy review. Nevertheless, given our lower inflation and growth forecasts vis-a-vis the projections of the MPC, we are not ruling out the possibility of a final 25 bps rate cut in October 2025, by when the monsoon outturn and its impact on food inflation would be clearer,” ICRA’s chief economist said.