Retail inflation eased to a three-month low of 6.77 per cent in October, down from a five-month high of 7.41 per cent in September, due to weaker food price rises and a strong year-on-year base, government data showed on Monday.

Data released by the National Statistics Office showed consumer price-based inflation, or retail inflation, has stubbornly held above the upper band of the Reserve Bank of India’s 2-6 per cent target for each month this year.

India’s central bank looks at retail inflation mainly to frame monetary policy, and any cooling in price pressures is a positive sign for the RBI fighting elevated inflation and trying to stimulate the economy simultaneously. 

The RBI has hiked its key interest rate four times this year to 5.90 per cent — the highest since April 2019. 

That lower price pressures reading lines up with RBI Governor Shaktikanta Das’s assessment on Saturday that retail inflation could fall below 7 per cent in October from 7.41 per cent in September.

According to Mr Das, who spoke at the HT Leadership Summit in New Delhi, inflation is a significant concern for India. He added that the central bank and the government had effectively taken several steps to address it over the past several months.

Still, the RBI has failed to manage price increases under the flexible inflation targeting framework implemented in 2016, as the CPI-based inflation has remained above the 2–6 per cent range for three consecutive quarters.

On November 3, the RBI’s Monetary Policy Committee (MPC) convened for the first time since the monetary policy framework came into effect about six years ago, an out-of-sequence meeting to debate and produce the report that would be given to the government for failing to uphold the inflation mandate.

The public has yet to be given access to more information about the conference.

According to a separate report, Morgan Stanley expects India’s retail inflation to track within the RBI’s target band by March 2023.

Further breakdown of the latest data showed rural inflation above the urban price pressures for the fifth month in a row.

Earlier in the day, data showed declining for the fifth straight month, wholesale price-based inflation cooled to 8.39 per cent in October from a year ago, its lowest since March 2021 and below a double-digit rise for the first time in 18 months.