India’s retail inflation has cooled to an eight-year low of 1.55% in July, providing further room to the RBI-led monetary policy committee (MPC) to cut interest rates amid tariffs-led trade tensions with the US. 

This marks the second-lowest ever inflation rate, government data showed. The all-time low under the current consumer price index (CPI) series was at 1.46% in June 2017.

Led by subdued food price rises, CPI inflation has for the first time in over six years fallen below the Reserve Bank of India’s 2% to 6% tolerance band. The last time it happened was in January 2019, when it stood at 1.97%.

The CPI inflation fell for the ninth month in a row in July. It was at 2.1% in the preceding month and 3.6% in July 2024.

"The significant decline in headline inflation and food inflation during the month of July 2025 is mainly attributed to favourable base effect and to decline in inflation of pulses and products, transport and communication, vegetables, cereal and products, education, egg and sugar and confectionery," the National Statistics Office (NSO) said.

Food inflation, which accounts for nearly half of the CPI basket, stood at -1.76% in July, lower than the -1.06% print in June. 

Last week, the MPC kept the policy repo rate unchanged at 5.50% and said the inflation outlook was "more benign". The pause followed three consecutive rate cuts this year to bring the repo rate down by 100 basis points to 5.5%.

The RBI has revised its inflation forecast downwards to 3.1% for FY26, from the earlier 3.7%.