Food prices, which make up about half of the consumer price basket, remained steady at 8.69 per cent from a year ago. Image Credit: Reuters

India’s inflation eased only slightly in May, staying above the central bank’s target and justifying the need for policymakers to remain cautious.

The consumer price index rose 4.75 per cent from a year earlier, compared with 4.83 per cent in April, the Statistics Ministry said Wednesday. That’s below the median forecast of a 4.85 per cent increase predicted by economists in a Bloomberg survey.

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The Reserve Bank of India is finding it difficult to bring inflation down to its 4 per cent target, given food price pressures. A severe heat wave across the country has renewed fears of a price spike, even though monsoon rains, which irrigate half of India’s farmlands, have arrived on time, providing some relief to farmers.

Food prices, which make up about half of the consumer price basket, remained steady at 8.69 per cent from a year ago, compared to 8.7 per cent in April. Excluding the volatile food and fuel components, core inflation eased to 3.12 per cent in May from a year earlier, compared to 3.25 per cent in April, according to calculations from Bloomberg Economics.

India’s consumer inflation for May extended a recent run of stickiness, suggesting the last leg of disinflation toward the Reserve Bank of India’s 4 per cent target is likely to be a slow process, according to Bloomberg’s India economist, Abhishek Gupta

The central bank left its benchmark interest rate unchanged last week for the eighth straight meeting and stuck to a relatively hawkish stance, with Governor Shaktikanta Das saying that food prices needed close monitoring. Most economists don’t expect any easing until the final quarter of this year, predicting the RBI will likely only move after the US Federal Reserve pivots.

Easing core inflation and forecasts of a normal monsoon will help rein in prices, said Garima Kapoor, an economist at Elara Securities India Pvt Ltd, by message. “The delayed rate cut cycle in US along with the RBI’s vigil on food inflation is likely to push the rate cycle in India to early next year,” she said.

Keeping inflation in control is crucial for Prime Minister Narendra Modi, who was forced to partner with allies after his party suffered an electoral setback in national polls. The high cost of living was seen as one of the many reasons behind Modi’s decline in support.