What was India's headline inflation rate in May 2024, and how did it compare to the RBI's target and market expectations?

India's consumer price index (CPI) inflation stood at 3.93% year-on-year in May 2024, which is below the Reserve Bank of India’s 4% target and also lower than economists’ expectations of 4.02%. This marks an increase from 3.48% in April but remains within the RBI’s tolerance band, supporting its recent decision to hold interest rates steady.

Why did the RBI recently choose to keep interest rates unchanged, and what factors are influencing its near-term policy outlook?

The RBI held interest rates unchanged a week before the May inflation data release, opting to wait for greater clarity on the inflation trajectory; the softer-than-expected 3.93% CPI print reinforced that stance. Additional context includes recent government and RBI measures to boost foreign inflows and stabilize the rupee—reducing reliance on rate hikes for currency support—as well as expectations of easing geopolitical pressures from a potential resolution of the West Asian crisis. However, rising food inflation (up to 4.78% in May from 4.20% in April) and risks from adverse monsoons and high energy prices have led economists to forecast cumulative 50 basis point rate hikes starting in October.

India Inflation Remains Below Target, Supporting RBI Rate Hold

Jun 12, 2026

India's May inflation rose to 3.93%, staying below the RBI's 4% target despite high fuel costs. The data supports the central bank's decision to maintain interest rates unchanged while monitoring food and energy price pressures.

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India Inflation Remains Below Target, Supporting RBI Rate Hold

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