The pace of retail inflation slowed to a 25-month low of 4.25% in May, driven by a higher year-on-year price rise in May 2022, when the month printed over 7%. Headline inflation extended its declining trend for a fourth month, in part validating the Reserve Bank of India’s (RBI) decision to pause monetary tightening until it can assess the impact of previous interest rate hikes. . Nevertheless, month-on-month, the provisional Consumer Price Index (CPI) showed price gains at 0.51% in May, remaining unchanged from the pace of April’s six-month high sequential inflation reading. A significant contributor to the decline in year-on-year price rise was inflation in food articles, which eased by 93 basis points to 2.91% in May. Oils and fats contributed to lower food prices, causing 16% deflation. Persistent deflation in the cereals and products category, which has about 10% weight in the CPI, also helped. Inflation in cereals eased over 100 basis points from April’s print to 12.7%. The risk of reading too high in the year-on-year moderation in inflation, however, was most pronounced in the food and beverages group, which accounts for 46% of the CPI, with sequential increases in price in nine of its 12 sub-groups. has been seen. level.
Prices of key food items, including vegetables and major protein sources of milk, meat and pulses, have registered a sharp rise from a month ago. Vegetable prices, which eased 8.2% from year-ago levels, clocked in at 3.35% sequential inflation, a pace that was nearly double April’s 1.7% month-on-month gain. Milk and dairy, and pulses are other food categories of concern. While year-on-year inflation in milk remained close to the 9% level in May, the sequential reading also stood at a three-month high of 0.67%. Prices of pulses, which are the primary protein source in the diets of vegetarian consumers, have been rising at a worrying clip, rising 128 basis points year-on-year to hit a 31-month high of 6.56%. Sequentially, the category that includes pulses like Arhar and Urad Dal registered an inflation of 1.21%. Recognizing the sensitivity of pulses prices, especially when key state elections are round the corner, the Center on June 2 imposed limits on holding stocks of urad and tur till October 31. Households’ perception of current inflation is trending at 8.8. %, and three-month and year-ahead estimates that prices rose more than 10% in the May round of the RBI’s inflation expectations survey, policymakers have their work cut out for them to assure consumers that given that inflation will be controlled so that they are not eroded. purchasing power and savings.