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Consumer inflation registers record fall; RBI may cut interest rates

Newspatrolling: Arising out of a drop in food prices, consumer inflation has fallen to record level of 1.54 percent in June. This is a further reduction, as compared to May, when the consumer inflation was 2.18 percent. This is the lowest consumer inflation recorded since the last series began in 2012. It is also well below the medium-term target of 4 percent, as prescribed by the Reserve Bank of India (RBI). Experts said that this record fall in consumer inflation may prompt RBI to reduce interest rates. The meeting for the next monetary policy by RBI will be held in August.

The fall in consumer inflation is in line with the opinions provided by leading economists in a survey conducted by Reuters. In the survey, it was predicted that consumer inflation will stand around 1.7 percent in June. The food and beverages price index, which accounts for around half of the consumer price index, had contracted 1.17 percent in June. Vegetable prices during the month had fallen 16.53 percent whereas pulses fell 22 percent, as compared to year-earlier figures. With predictions of a good monsoon this year, food inflation is likely to remain low in the coming months.

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