Food and fuel take retail inflation to six-year low

Consumer Price Index (CPI)-based inflation dropped further in June to 2.1% - the lowest since January 2019 0- from 2.8% in May as food inflation turned negative and fuel inflation continued easing.

The food inflation settled at -1.1% - also the lowest since January 2019 - from 1.0% in May; fuel inflation slipped to 2.6% from 2.8% previously.

There was a pick-up in core inflation to 4.4% from 4.2% in May, driven by a broad-based uptick across various subcategories, including surging gold inflation. Core remained below its decadal trend rate of 4.9%.

Based on the inflation trajectory and the outlook on agriculture and global oil and commodity prices, we expect headline inflation to average 4% this fiscal from 4.6% in fiscal 2025. The lower inflation gives the Reserve Bank of India’s Monetary Policy Committee headroom for another rate cut this fiscal, apart from the 100 basis points pared so far.