NEW DELHI- India’s annual retail inflation cooled to a more than two-year low of 4.25 percent in May as cost pressures on food eased, moving closer to the Reserve Bank of India’s (RBI) target of 4 percent, government data showed on Monday.
However, inflation is now expected to pick-up again, underlining the central bank’s message that tight monetary conditions should remain in place until price pressures cool on a sustainable basis.
Inflation eased to 4.25 percent in May from 4.7 percent in April, firmly within the RBI’s inflation band of 2 percent-6 percent for the third straight month.
Last week, the RBI said it will focus on anchoring inflation close to 4 percent, the mid-point of the range, as it kept rates on hold for second straight meeting.
The latest reading compared with 4.42 percent in a Reuters poll of 45 economists and was the lowest since January 2021.
Food inflation, which accounts for nearly half of the overall consumer price basket, moderated to 2.91 percent in May against 3.84 percent in April.
“Food inflation benefited from a sequential fall in the prices of fruits and oils,” said Suvodeep Rakshit, economist at Kotak Institutional Equities.
However, concerns are growing that deficient monsoon rains to feed crops will add pressure on food prices in coming months with signs that the hot, dry weather caused by the El Nino weather phenomenon is threatening farms across Asia.
