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Retail inflation eases to 7.04% in May, still above RBI’s target: NSO

News Agencies

New Delhi, June 13: Retail inflation eased to 7.04 per cent in May, mainly on account of softening food prices, though it remained above the RBI’s upper tolerance level for the fifth consecutive month, government data showed on Monday.

The Consumer Price Index (CPI) based inflation was 7.79 per cent in April. In May 2021, the retail inflation stood at 6.3 per cent.

Inflation in the food basket was 7.97 per cent in May 2022, marginally lower than 8.31 per cent in the previous month, as per the data released by the National Statistical Office (NSO).

The Reserve Bank, which factors in the CPI in its monetary policy, had earlier this month raised the inflation forecast for the current financial year to 6.7 per cent from its previous estimate of 5.7 per cent.

As per the RBI’s projections, inflation in the first quarter of the fiscal is likely to be 7.5 per cent and at 7.4 per cent in the following three months. It is expected to decline to to 6.2 per cent and 5.8 per cent in the third and fourth quarters, respectively.

Late last month, Centre announced a series of changes to the tax structure levied on essential commodities and trimmed fuel tax to cushion consumers from rising prices and fight high inflation.

Sharp spike in prices of wheat, tomatoes, potatoes and other vegetables – key ingredients in every Indian kitchen – kept inflation elevated in May as well. Crop yields are down because of dry spells and heatwaves in northern India.

After a surprise 40-basis-point hike at an unscheduled meeting in May, the RBI lifted its repo rate another 50 basis points to 4.90% on Wednesday and said inflation will likely remain above its 6% upper tolerance band until December this year. The government has tasked the RBI to ensure inflation remains at 4 per cent with margin of 2 per cent on either side.

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