Data released by the ministry of commerce and industry on Wednesday showed inflation, as measured by the Wholesale Price Index (WPI), contracted by 3.5% in May, sharper than the 0.9% decline recorded in April.
The ministry said the decline in the rate of inflation in May is primarily contributed by fall in prices of mineral oils, basic metals, food products, textiles, non-food articles, crude petroleum & natural gas, and chemical & chemical products.
Data released earlier this week showed retail inflation eased to a 25-month low in May on the back of a favourable base effect and moderating food prices.
“Food prices rose 1.5% YoY in May, down from 3.5% in April. Sequentially, WPI primary food prices declined 0.2% MoM in May (+1.5% in April), driven by prices falling in cereals, vegetables, and fruits,” Barclays said in a note.
Economists expect the RBI to hold interest rates for now as it assesses the impact of the previous rate increases. The El Nino weather phenomenon also needs to be watched for its impact on monsoon rains and the farm sector.
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