The inflation reading was however lower than economists' expectations.

According to a median consensus of 40 economists polled by news agency Reuters between July 4 and July 7, retail inflation was expected at an annual rate of 3.20 per cent in June.

The latest data supports the RBI's decision last month to cut interest rates to boost economic growth that slowed to more than a four-year low in the January-March quarter.

Food inflation accelerated to 2.17 per cent last month, from 1.83 per cent in May.

Food prices - which constitute nearly half of the inflation basket - have steadily risen since March after contracting from October last year to February this year.

The data reinforced hopes of further monetary easing by the central bank.

"Food inflation trend is upwards while core is downwards, so the overall outlook on inflation is benign. The RBI will continue to maintain its accommodative stance and could do another 25-50 basis points rate cuts in this financial year," said Sujan Hajra, chief economist at Anand Rathi Securities.

The central bank's next bi-monthly policy review is due in August. The RBI has cut its policy rate three times since February, comforted by subdued price pressures but concerned about faltering growth.

It tracks consumer inflation primarily for formulating the monetary policy.