Consumer Inflation Picks Up To 3.05% In May, Highest In 7 Months

Consumer inflation picked up to 3.05 per cent in May, from 2.99 per cent in the previous month, government data showed on Wednesday. That marked the highest level of consumer inflation - determined by Consumer Price Index (CPI) - since October 2018 when it came in at 3.38 per cent. Wednesday's data still meant inflation stood well below the central bank's medium-term target of 4 per cent for a tenth month in a row, fuelling hopes of further monetary easing going forward. (Here's What Experts Say)

Inflation in May was higher than economists' estimates. More than 40 economists in a poll conducted during June 4-7 by news agency Reuters had expected retail inflation at 3.01 per cent in May. Forecast ranged between 2.83 per cent and 3.50 per cent.

Food inflation stood at 1.83 per cent in May, as against 1.1 per cent in the previous month. Food prices - which constitute nearly half of the inflation basket - have steadily risen since March after contracting from October 2018-February 2019.

The latest set of inflation data comes days after the Reserve Bank of India (RBI) reduced the repo rate - the key interest rate at which it lends short-term funds to commercial banks - to a nine-year low of 5.75 per cent.

The central bank's six-member Monetary Policy Committee also changed its stance to "accommodative" from "neutral", indicating that further rate cuts are on the table.

The RBI tracks consumer inflation primarily to formulate its monetary policy.

Separate official data showed that growth in industrial production or factory output - gauged by Index of Industrial Production (IIP) - stood at 3.4 per cent in April, as against a contraction of 0.1 per cent in the previous month.