Consumer prices in India continued to slide in April, giving the central bank room to keep rates on hold after an aggressive tightening campaign dampened demand and muddled the wider outlook for the economy.

Inflation rose 4.70% last month from a year earlier, according to data released by the Statistics Ministry on Friday. The median estimate in a Bloomberg survey of economists was for a 4.76% gain. A third straight month of cooling prices brings the marker closer to the mid-point of the Reserve Bank of India’s 2%-6% target.

This will bring relief to Asia’s third-largest economy, which is facing headwinds from geopolitical tensions and slowing global demand. With higher borrowing costs weighing on India’s world-beating growth, the central bank put the brakes on its tightening cycle in April, while leaving the door open for maneuvering until the “war against inflation” is over.

The decline in inflation is expected to help the central bank’s six-member Monetary Policy Committee leave the benchmark rate unchanged for the second time when it meets on June 6-8. While Governor Shaktikanta Das described the MPC’s April decision as a “pause, not a pivot,” his deputy Michael Patra sees the economy transitioning into a “low inflation regime.”

The RBI’s pause is in line with the pivot by global central banks. The US Federal Reserve lifted interest rates by a quarter point last week and hinted it could be the last increase for now. The impact is reflecting in India’s debt markets, with the benchmark 10-year yields hovering around 7% — the lowest level in more than a year.

Political Gains

Containing price pressures is equally important for Prime Minister Narendra Modi whose ruling party is fighting hard to retain power in a key state this week and ahead of national elections next year where the leader will seek a third term. Inflation has been a hotly-debated campaign issue in recent local ballots and is a key worry for voters.

Although price pressures have eased, unseasonal rains and rising housing costs are the new risks on the minds of policy makers. Earlier this month, Finance Minister Nirmala Sitharaman said inflation is “slightly above” a tolerable level and the government is working to control it.

While the government has boosted imports of items such as edible oils to rein in inflation, it’s the falling global commodity prices that have primarily contributed to slower consumer price gains. The impact is more pronounced in wholesale prices, which fell 0.35% in April from a year ago, according to a seperate Bloomberg survey. The gap between the two gauges is widening as manufacturers refrain from fully passing on the fall in input costs to end-consumers to protect margins.

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