Retail inflation in India dips to five-month low in July
Retail inflation in India eased to 6.71% in July, which is the lowest since March.
The annual drop is still above the upper limit of the Reserve Bank of India's target range for seven straight months, reports NDTV.
In June, inflation held above 7% for the third month in a row, at 7.01% from a year ago.
Last month, easing food prices - which account for nearly half of the consumer price index basket - and fuel costs helped lower the pace of increase in price pressures.
That is likely the lagged effect from a fuel tax cut.
The bulk of the slowdown comes from recession fears, which have lowered global commodity prices, with the international oil benchmark, Brent crude, is down about 9 per cent for the month, hitting pre-Ukraine crisis lows, and below $100 a barrel.
Government interventions to reduce import duties and restrictions on wheat exports likely helped too.
Still, consumer price rises are expected to persist at a strong pace in the months ahead, with the RBI's projections pointing to inflation remaining above its upper end of the 2-6 per cent target range.
The near-term inflation outlook is still quite uncertain because the government's efforts to rein in consumer price increases may be less effective due to the unevenness of this year's rainfall and a weak
The government has mandated the central bank to keep retail inflation at 4 per cent, with a tolerance level of plus or minus 2 per cent of that rate, which is between 2 and 6 per cent.
With the inflation outlook elevated, the RBI was forced to hike its key repo rate for the first time in four years, lifting it by 40 basis points (bps) in an off-cycle meeting in May, a follow-up 50 basis points increase in June, and another larger-than-predicted 50 basis points this month, taking the repo rate to 5.40 per cent.
The repo rate is the rate at which RBI lends money to commercial banks and the latest inflation data suggests interest rates are set to keep rising.