Sign in Subscribe
Banking industry

Retail Inflation Slows to 7.04% in May Amid Fuel Price Cuts, Food Prices Softening

Strategic Insights

— 1 min read

Retail inflation eased to 7.04% in May from an eight-year high in the previous month, as fuel prices dropped following duty cuts and food prices softened, as per data released on Monday. Despite the slowdown, the figure remained above the Reserve Bank of India's target range of 2-6%. Economists expect the RBI to continue tightening monetary policy to rein in prices, with some forecasting a 35bps and 25bps increase in policy rates in the next two policy reviews.

Key Takeaways:

  • Retail inflation slowed to 7.04% in May, down from 7.79% in April, an eight-year high.
  • Fuel prices dropped following duty cuts, contributing to the slowdown in inflation.
  • Food prices softened, with international crude prices and rupee depreciation suggesting retail inflation is likely to remain elevated.
  • Economists expect the Reserve Bank of India to continue tightening monetary policy to rein in prices.
  • The RBI raised the key repo rate by half a percentage point last week, pegging inflation in FY23 at 6.7%.
  • Refiners bought 18% of all crude Russia exported in May, up from 1% before the Ukraine invasion.
  • RIL's Jamnagar refinery sourced 27% of its needs from Russia in May.

Statistics:

  • Retail inflation rate in May: 7.04%
  • Retail inflation rate in April: 7.79%
  • Reserve Bank of India's target range for inflation: 2-6%
  • Increase in policy rates forecast by economists: 35bps and 25bps in the next two policy reviews
  • RBI's key repo rate increase: 0.5 percentage points
  • Inflation pegged by RBI for FY23: 6.7%
  • Refiners' share of Russian crude imports in May: 18%
  • RIL's refinery's share of Russian crude imports in May: 27%

Sources:

  • "Data released on Monday showed retail inflation slowed to 7.04% in May"
  • RBI's key repo rate increase announcement
  • ICRA chief economist Aditi Nayar's statement
  • "The RBI raised the key repo rate by half a percentage point last week, pegging inflation in FY23 at 6.7%"
  • "Refiners bought 18% of all crude Russia exported in May, up from 1% before Ukraine invasion"
  • "RIL's Jamnagar refinery sourced 27% of its needs from Russia in May"

Read more