Why did retail inflation fall to a six-year low in June 2025?

India’s retail inflation fell to 2.10 percent in June 2025, the lowest since January 2019. This steep fall was driven by a 19.2 percent drop in vegetable prices and a 5.1 percent fall in overall food inflation. Pulses and cereals remained slightly expensive, but cheaper milk, eggs and oils helped pull the food index down. A favorable monsoon and higher food supply played a major role in easing prices across most categories.

Core inflation, which excludes food and fuel, stayed steady at around 4.5 percent. Services like education, housing and health saw moderate price increases. Rural inflation was at 1.9 percent, while urban inflation came in at 2.2 percent. This marks the eighth straight month that headline inflation stayed within the RBI’s target band of two to six percent, and the fifth month below the midpoint of four percent. Fuel prices also eased, adding to the overall softness.

With inflation so low, many economists expect another repo rate cut from the Reserve Bank of India. The RBI had already reduced the rate by 50 basis points in June to support growth. Now, with June inflation well below expectations and likely to stay low in the short term, the bank has more room to ease rates again possibly as soon as September. This could reduce borrowing costs and encourage investment, but the RBI will watch for signs of weak demand or deflation before taking the next step.