Retail Inflation Falls Below RBI’s Target

A sharp decline of 222bps is observed in food inflation in February 2025 in comparison to January 2025. The food inflation in February 2025 is the lowest after May 2023 - National Statistics Office

New Delhi: Retail inflation slipped to seven-month low of 3.61 per cent in February mainly due to easing prices of vegetables, eggs, and other protein-rich items, creating space for the RBI to go for another cut in interest rate next month. The consumer price index-based retail inflation was at 4.26 per cent in January and 5.09 per cent in February 2024. The previous low was witnessed in July. The consumer price index (CPI) has been in the comfort zone of the Reserve Bank of India (RBI) since November 2024.

“There is a decline of 65 basis points in headline inflation of February 2025 in comparison to January 2025. It is the lowest year-on-year inflation after July 2024,” the National Statistics Office (NSO) said, while releasing the CPI. Year-on-year food inflation for February was 3.75 per cent.

“A sharp decline of 222 basis points is observed in food inflation in February 2025 in comparison to January 2025. The food inflation in February 2025 is the lowest after May 2023,” NSO said.

“However, we believe that the sequential uptick in vegetables inflation in March 2025 is likely to prevent a further softening in the food and beverages inflation print in the month, after the substantial cooling seen over the past four months,” said Aditi Nayar, chief economist at Icra. Nayar further said the February inflation print falling well below 4 per cent has cemented the expectation of a back-to-back 25 basis points rate cut in the April 2025 MPC meeting. This may be followed by another 25 bps repo rate cut either in the June 2025 or the August 2025 meetings, she added.

A significant decline in headline inflation and food inflation during February has been mainly attributed to decline in inflation of vegetables, egg, meat and fish, pulses and products, and milk and products.