July Retail inflation falls to 6.71% as food prices soften

Retail inflation eased to 6.71 per cent in July, the lowest since March, but above the upper limit of the Reserve Bank of India's target range for seven straight months. In June, inflation held above 7 per cent for the third month in a row, at 7.01 per cent from a year ago, government data showed on Friday. In the first three months of the current fiscal, retail inflation remained above 7 per cent. A further breakdown of the latest data shows a big decline in inflation in rural India to 6.80 per cent in July compared to 7.09 per cent in the month before. In Urban areas, the CPI Inflation rate nudged lower to 6.49 per cent last month from 6.86 per cent in June.

Last month, easing food prices - which account for nearly half of the consumer price index basket - and fuel costs helped lower the pace of rise in price pressures. According to the data, food inflation in July 2022 moderated to 6.75 per cent, compared to 7.75 per cent in June. The bulk of the slowdown comes from recession fears, which have lowered global commodity prices, with the international oil benchmark, Brent crude, down about 9 per cent for the month, hitting pre-Ukraine crisis lows and below $100 a barrel.That slowdown is also because of the lagged reflection of the fuel tax cut. Government interventions to reduce import duties and restrictions on wheat exports helped too. With the inflation outlook elevated, the RBI was forced to hike its key repo rate for the first time in four years, lifting it by 40 basis points (bps) in an off-cycle meeting in May, a follow-up 50 basis points increase in June, and another larger-than-predicted 50 basis points this month, taking the repo rate to 5.40 per cent.