Retail inflation rises to 5.08 per cent in June, says govt data

Retail inflation climbed to 5.08 per cent in June due to higher prices of kitchen items, according to government data released on Friday.

The Consumer Price Index (CPI) based retail inflation was 4.8 per cent in May 2024 and 4.87 per cent in June 2023.

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Food prices push inflation

Inflation in the food basket increased to 9.36 per cent in June from 8.69 per cent in May, as per the National Statistical Office (NSO).

Food prices continue to challenge policymakers in India. Government data released on Friday showed month-on-month increases in retail inflation for cereals, meat and fish, eggs, dairy, oils and fats, fruits, vegetables, pulses, sugar, spices, and prepared snacks and sweets.

The data were collected from 1,114 urban markets and 1,181 villages across all states and union territories through personal visits by field staff.

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How will retail inflation affect RBI's repo rate decision?

The government has mandated the Reserve Bank of India (RBI) to keep CPI inflation at 4 per cent, with a margin of 2 per cent on either side. The RBI projected CPI inflation for 2024-25 at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.

Retail inflation is a key factor in the RBI's bi-monthly monetary policy decisions.
Since May 2022, excluding recent pauses, the RBI has increased the repo rate by a total of 250 basis points to combat inflation. Raising interest rates is a monetary policy tool used to reduce demand in the economy, which helps lower the inflation rate.

The repo rate is the interest rate at which the RBI lends to other banks.