Retail inflation seen at 2.5% or lower in June: BoB Report

With good rains across the country and thanks to the base effect, retail inflation is seen to remain benign at 2.5% or less in June, but seasonal pressures are cropping up. Prices of kitchen staples such as tomatoes are beginning to see a spike, which could put pressure on retail inflation in July.

“The outlook for inflation remains comforting for now, as it has the handholding of a favourable statistical base. This is likely to continue in July 2025 as well. We expect to settle CPI to settle at 2.6% in June 2025. Thus, giving a breather for RBI in terms of focusing on growth,” said a report by Bank of Baroda.

ICRA has also pegged headline CPI inflation at about 2.5% in June. “With the benign YoY inflation prints for most vegetables, reduction in import duty for edible oils, as well as a favourable base, food and beverage inflation is set to ease further in June 2025,” it had said in a recent report.

Consumer price index-based inflation had eased to 2.82% in May, which was the lowest year-on-year inflation after February 2019, led by a sharp fall in food prices. Official data for CPI inflation for June will be released on July 14.

The Reserve Bank of India’s Monetary Policy Committee in its June meeting had also noted that the outlook for inflation points towards benign prices across major constituents. It has forecast CPI inflation for the FY26 at 3.7%, with Q1 at 2.9%; Q2 at 3.4%; Q3 at 3.9%; and Q4 at 4.4%.

However, more recent data from the ministry of consumer affairs shows that prices of items like tomato have already started climbing up. The price of one kg of tomatoes has risen to Rs 39.23, up 41% from Rs 27.82 per kilo a month ago. However, it remains way below the price of Rs 59.94 that it had touched a year ago.

Potato prices have also picked up very marginally from last month but prices of most pulses and cereals remain benign compared to last month and last year as well.

“The usual seasonal build up in TOP (Tomato, Onion and Potato) prices are visible with the sharpest upward correction witnessed for Tomato. The TOP trajectory requires close monitoring as June and July have the usual seasonal trend of reversal in prices for these items as one harvesting period is at its end,” said the note by Bank of Baroda.

Volatile food prices, especially vegetables and fruits, have been a major concern for policymakers and the RBI over the last two years, and have been primarily responsible for high retail inflation.