Retail inflation, which is based on the Consumer Price Index, eased slightly to 3.15% in July, government data showed on Tuesday. The inflation figure was 3.18% in June, an eight-month high. It had last shown a decline in January and had been rising gradually ever since.
Retail inflation in rural areas declined from 2.21% in June to 2.19% in July. In urban areas, it declined from 4.33% to 4.22%. Consumer food price inflation stood at 2.36% in July compared to 2.25% in June.
The Reserve Bank of India targets a retail inflation of 4% with a tolerance band of 2% on either side. It uses monetary policy to control inflation. In its last bimonthly monetary policy meeting earlier in August, the central bank reduced the repo rate for the fourth time this year to 5.4%.
The repo rate is the interest rate at which the RBI lends to commercial banks. So when the interest rate is lowered, it encourages more money supply in the economy, and can help increase inflation rates when they have been on the decline.