NEW DELHI: India’s annual retail inflation cooled to a more than two-year low of 4.25% in May as cost pressures on food eased, moving closer to the Reserve Bank of India’s target of 4%, government data showed on Monday.

A Reuters poll of 45 economists had predicted the consumer price index would rise 4.42% in May from a year earlier.

That left retail inflation below the RBI’s upper limit for the third straight month, and it was below the 4.7% reported in April.

The law mandates that the central bank should target inflation at 4%, with flexibility of 2 percentage points either side.

India records strong 7.2% annual growth, among fastest-expanding major economies

Last week, India’s central bank kept its key lending rate steady for a second straight meeting and signalled monetary conditions would remain tight until inflation falls towards 4% on a sustainable basis.

India’s retail inflation was last below 4% in September 2019.

Economists say strong inflation levels last year have flattered data this year and the so-called positive base effect will now wane. So after falling towards 4% in May, they expect inflation to start picking up again.

Food inflation, which accounts for nearly half of the overall consumer price basket, eased to 2.91% in May against 3.84% in April.