May Retail Inflation falls, Still above RBI's Target Band
May Retail Inflation falls, Still above RBI's Target Band

Retail inflation fell to 7.04 percent in May, owing to lower food and fuel costs, as the government and the RBI reacted with duty reductions and repo rate hikes to rein in spiralling prices. However, for the fifth month in a row, inflation remained above the Reserve Bank's upper tolerance range of 6%.

Retail inflation based on the Consumer Price Index (CPI) was 7.79 percent in April. Retail inflation was 6.3 percent in May 2021, the same month a year ago. According to figures provided by the National Statistical Office (NSO) on Monday, inflation in the food basket was 7.97% in May 2022, down from 8.31% the previous month. In the overall Consumer Price Index, the food basket has a weighting of 39.06 percent. According to the report, inflation in the 'cereals and goods' section fell to 5.33 percent in May from 5.96 percent the previous month, while inflation in the 'oil and fats' segment fell to 13.26 percent from 17.28 percent.

Fruit price increases have decreased to 2.33 percent from 4.99 percent. Vegetable prices, on the other hand, increased by 18.26% in May, compared to 15.41% in April. Egg prices and 'pulses and products' prices showed deceleration with negative inflation figures of (-)4.64 percent and (-)0.42 percent, respectively. Inflation in the 'fuel and light' category fell to 9.54 percent in May, down from 10.80 percent in April.

The Reserve Bank, which uses the CPI to determine monetary policy, upped its inflation projection for the current financial year to 6.7 percent from 5.7 percent earlier this month. According to the RBI's predictions, inflation will be 7.5% in the first quarter of the fiscal year and 7.4% in the following three months. In the third and fourth quarters, it is predicted to fall to 6.2 percent and 5.8 percent, respectively. The RBI has been required by the government to maintain a 4% inflation target with a 2% buffer on each side.

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