By Shivangi Acharya and Sarita Chaganti Singh
NEW DELHI, Jan 12 (Reuters) - India's key inflation rate rose at its fastest pace in three months in December as the decline in food prices slowed, data showed
on Monday, amid expectations that prices could continue inching up this year.
Annual retail inflation quickened to 1.33% in December from 0.71% in November, government data showed. A Reuters poll had projected retail inflation at 1.5%.
The print was below the Reserve Bank of India's target range of 2% to 6% for the fourth straight month.
India reported inflation of 1.44% in September last year.
Food prices fell 2.71% year-on-year in December against a decline of 3.91% in November. Vegetable prices fell 18.47% after a 22.20% decline a month ago.
While Prime Minister Narendra Modi's consumer tax cuts are seen keeping inflation in check going ahead, uncertainty over a trade deal with the U.S. that led to the rupee depreciating 4.7% in 2025, its largest annual fall in three years, could keep up the pressure.
"We believe the bottom for inflation is now behind us and inflation could continue to edge up over the coming months, although still expected to remain well below 4% till mid-2026," said Sakshi Gupta, an economist at HDFC Bank.
Benign inflation and high economic growth prompted the RBI to cut interest rates by 25 basis points last month, and some economists expect another rate cut. The RBI's next policy decision is on February 6.
India's economy is estimated to grow at 7.4% in the fiscal year ending in March, helping New Delhi cope with the impact of punitive U.S. tariffs.
Core inflation, which excludes volatile items such as food and energy and is an indicator of demand in the economy, was between 4.6% and 4.63% in December, compared with 4.2% to 4.3% in November, according to two economists.
Core inflation has been elevated partly because of firm gold prices.
The December inflation print was the last before India launches a new consumer price index series next month with 2024 as the base year, incorporating new data and updated consumption baskets.
Inflation estimates could be influenced by the new series, HDFC Bank's Gupta said.
(Reporting by Shivangi Acharya, Sarita Chaganti Singh and Manoj Kumar in New Delhi; Additional reporting by Hritam Mukherjee; Graphics by Sumanta Sen; Editing by Mrigank Dhaniwala)
