India's retail inflation likely declined further to 2.7% in May: BoB Report

Retail inflation in India is expected to have eased to 2.7 per cent in May 2025, according to a report by Bank of Baroda (BoB).
The Ministry of Statistics and Programme Implementation, Government of India, is likely to release the official Consumer Price Index (CPI) data later in the day. In April, CPI inflation was 3.16 per cent.
The report highlighted that expected moderation was largely led by a decline in food inflation, offering some relief to consumers and policymakers alike. This projection signals continued stability in domestic price levels and reflects the impact of improving food supply conditions.
The report said, "In India, CPI inflation is expected to moderate to 2.7 per cent in May'25 (BoB Estimate), led by softening food inflation".
The report noted that the moderation in India's Consumer Price Index (CPI) was in line with expectations and highlighted a positive trend in inflation control efforts.
A softening in food prices contributed significantly to the drop, helping CPI inflation settle below the Reserve Bank of India's (RBI) medium-term target range.
The report also highlighted that the retail inflation in the United States showed signs of cooling. The US CPI increased by just 0.1 per cent month-on-month in May 2025, lower than the estimated 0.2 per cent and down from 0.2 per cent in April.
The decline was mainly driven by a sharp drop in gasoline prices, even as food and shelter prices rose.
This softer inflation data from the US has fueled expectations that the Federal Reserve may resume interest rate cuts. The probability of a rate cut in September 2025 has now risen to 60 per cent, compared to about 53 per cent just two days ago on June 10.
The report also highlighted "Separately, investors also monitored comments from the US and China on the recently concluded trade talks, while awaiting the fine print of the agreement".
Market reactions have been mixed. US stocks on Wednesday reflected a cautious mood as the softer inflation figures raised concerns over the strength of future economic growth. On the other hand, Asian equities showed resilience, buoyed by the positive developments in US-China trade relations.
Overall, the moderation in inflation in both India and the US provides some breathing space for central banks and sets the stage for potential shifts in monetary policy.

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