INFLATION TOUCHES FIVE MONTH LOW

New Delhi, June 14: Cheaper vegetables, along with pulses and meat, dragged down wholesale inflation for May to a five-month low of 2.17 per cent, putting pressure on the RBI to relax interest rate.

The wholesale price index (WPI) based inflation was 3.85 per cent in the previous month and ()0.9 per cent in May 2016. The reading was 2.10 per cent in December 2016.

RBI, in its monetary policy review this month, had revised downwards retail inflation forecast for the first half of the fiscal.

WPI is now based on the new base year 201112, which was revised last month from 2004-05, with an aim to reflect the macroeconomic picture more accurately.

The government data showed that prices of food articles shrank by 2.27 per cent in May on an yearly basis.

The inflation print for vegetables read (-)18.51 per cent. While potato saw a deflation of 44.36 per cent, for onion, it came in at 12.86 per cent.

Pulses and cereals saw a slower growth in prices. The rate of price increase was 4.15 per cent in cereals, down from 6.67 per cent in May last year. Protein-rich pulses turned cheaper in May as prices fell by 19.73 per cent.

Eggs, meat and fish saw a price decline of 1.02 per cent annually.

The RBI primarily factors in retail inflation based on the consumer price index (CPI) to set its policy. This time, it maintained status quo on key short-term lending rate (repo), citing upward risks to inflation.