India's retail inflation drops to 8-year low at 1.55%
What's the story
India's retail inflation has dropped to an eight-year low of 1.55% in July, official data released on Tuesday showed. The figure is a sharp decline from June's 2.1% and marks the first time since June 2017 that retail inflation has fallen below the 2% mark. The decline is largely attributed to cooling food prices, which have helped extend a six-month streak of sub-4% inflation with an average below 3% since April.
Food prices
Food inflation remained in negative zone
Food inflation has remained in the negative zone for the second consecutive month, with a deeper deflation of 1.8% as compared to June's -1.1%. The Reserve Bank of India (RBI) had recently revised its full-year inflation forecast from 3.7% to 3.1%. It now expects an average inflation rate of 2.1% in Q2, rising to 3.1% in Q3 and peaking at 4.4% by Q4-end.
Policy outlook
MPC keeps repo rate unchanged at 5.50%
The RBI's Monetary Policy Committee (MPC) kept its policy repo rate unchanged at 5.5% and retained a 'Neutral' stance. This comes after three consecutive rate cuts since February, totaling 100 basis points. The MPC also noted that risks to the inflation outlook are "evenly balanced." Core inflation has remained stable around the 4% mark, as anticipated by economists.