VIEW India's May retail inflation slows to 2.82% y/y

Reuters

2 days ago

June 12 (Reuters) - India's annual retail inflation (INCPIY=ECI), opens new tab slowed to 2.82% in May from 3.16% in May on the back of a slower rise in food prices, government data showed on Thursday.
The inflation print was below economists' estimate of 3% in a Reuters poll.
COMMENTARY:
"We expect this downward trend in retail inflation to continue through October 2025, with the possibility of a mild uptick thereafter; nevertheless, average inflation for fiscal 2026 is likely to undershoot the RBI's downwardly revised estimate of 3.7%."
"Despite this disinflation, the frontloaded rate cuts and liquidity-boosting CRR reductions already announced suggest the RBI will remain on hold until at least September 2025. However, if inflation remains subdued and growth begins to cool, further rate cuts could be on the cards."
"Today's print further confirms the moderating inflation trend witnessed over the last few months on the back of healthy agriculture supply. We expect the next inflation print to also be close to or below 3%. Beyond that, the progress of the monsoon season could become critical to gauge any risk of food inflation spikes."
"The RBI has already frontloaded its rate cuts and we do not expect any further rate action in the next policy. We see limited reaction in the bond market to this inflation print."
"May CPI inflation came in closer to our expectation led by continued benign food prices. We expect CPI inflation to undershoot RBI's fiscal year 2026 projection of 3.7% by 20 odd basis points (bps). As such, the prospect of another 25 bps rate cut stays alive."
"The headline inflation came in broadly in line with our expectations. High frequency data shows that the vegetable and fruit prices have started surging, offseting the downward trend visible in cereals and pulses."
"While the overall inflation trajectory is expected to remain benign, the recent front-loaded policy actions and the guidance of limited room for incremental easing suggests prolonged pause for now, with further actions being highly data dependant."
"India's inflation came in close to our expectations in May, below 3%, softest since mid-2019. Selected perishable food groups were up modestly on a sequential basis but moderated on annual terms, aiding the headline."
"Benign core-core prints point to economic slack, backing recent moves to front-load monetary and liquidity stimulus. Monsoon developments warrant attention after progress stalled after an early onset. For the full year, we expect inflation to average below 4%, aligning with our core-core measures."