RBI's inflation, growth outlook may mean end of easing cycle, some analysts say
The RBI has trimmed its key policy rate by 100 basis points since February.
While a Reuters poll had predicted one more 25 basis points cut this cycle, some analysts are now reassessing that view.
"Given the characterisation of monetary policy in the August meeting and the growth and inflation forecasts, we do not find much scope for an immediate rate cut," said Samiran Chakraborty, chief economist at Citi.
The bank, which had earlier expected a 25 basis points cut in August, now sees the repo rate holding at 5.50% this cycle, up from its previous forecast of 5.25%.
The RBI retained its Jan–March inflation outlook at 4.4% and projects a rise to 4.9% in April–June 2026.
India's retail inflation fell to a more than six-year low of 2.1% in June and is expected to hit a record low in July. Data is due to be released on August 12.
However, RBI Governor Sanjay Malhotra said the sharp fall in headline inflation was driven by volatile food prices and is likely to pick up toward year-end.
"One year ahead, factoring in the April–June inflation forecast at 4.9% and the repo rate at 5.5%, the real rate buffer will narrow significantly. The terminal rate is likely to stay at 5.5% this year," said Radhika Rao, senior economist at DBS Bank.
Analysts at Capital Economics, Bank of Baroda, Kotak Securities and Edelweiss Mutual Fund also said the central bank may have ended its easing cycle.
"There is little in today's policy announcement to change our view that the easing cycle has come to an end," said Shilan Shah, deputy chief emerging markets economist at Capital Economics.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
6 minutes ago
- Reuters
Selwood Asset Management says Louis Hachette should change market listing
PARIS, Aug 11 (Reuters) - Investment company Selwood Asset Management said on Monday that French media company Louis Hachette Group ( opens new tab should seek a new stock market listing to boost its growth, and urged Canal Plus (CAN.L), opens new tab to also do more to get value for investors. Selwood Asset Management owns about 1.5% of LHG's share capital and around 0.5% of TV and media company Canal Plus. "Upgrading LHG's listing from Euronext Growth to a higher market segment would not only enhance visibility but could also, by our estimates, generate close to 30 million shares of passive demand, further supporting valuation re-rating," Karim Moussalem, Selwood's chief investment officer, said.
Reuters
6 minutes ago
- Reuters
Dollar steady before US inflation report, US-China tariff deadline
LONDON, Aug 11 (Reuters) - The U.S. dollar was little changed on Monday before Tuesday's deadline for Washington and Beijing to strike a tariff deal and a key U.S. inflation report that could help determine whether the Federal Reserve lowers borrowing costs next month. The dollar index was down less than 0.1% to 98.164 after last week's 0.4% fall. Against the yen, the U.S. currency traded at 147.39 , down 0.2%. Japanese markets were closed on Monday for the Mountain Day holiday. The euro was up less than 0.1% at $1.1652, while sterling was flat at $1.3462. The dollar remains on the back foot as investors recently adjusted their expectations for interest rate cuts from the Fed after soft U.S. jobs and manufacturing figures. Fed officials have sounded increasingly uneasy about the labour market, signalling their openness to a rate cut as soon as September. Cooling inflation could cement bets for a cut next month but if signs emerge that U.S. President Donald Trump's tariffs are fuelling price rises it might keep the Fed on hold for now. "It's important to note ahead of tomorrow's data that the bar for a hawkish surprise is higher," said Francesco Pesole, FX strategist at ING. Pesole added that a 0.3% monthly rise in core CPI would give the Fed room to lower interest rates, given the deterioration in the labour market. Economists polled by Reuters expect core CPI to have risen 0.3% in July, pushing the annual rate higher to 3%. Money market traders are pricing in around a 90% chance of a rate cut next month, while 58 basis points of easing are priced in by year-end, implying two quarter-point cuts and around a one-in-three chance of a third. Personnel moves at the Fed have also weighed on the dollar recently as Trump prepares to install rate-setters that support his dovish views on monetary policy, including a new chair for when Jerome Powell's term ends in May. Trade talks were also in focus as Trump's August 12 deadline for a deal between the U.S. and China neared, particularly on chip policy. "The market has fully priced in the idea that we're going to get an extension," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne, adding that another 90-day truce was most likely. With the U.S. and China seeking to close a deal averting triple-digit goods tariffs, a U.S. official told Reuters that chip makers Nvidia (NVDA.O), opens new tab and AMD (AMD.O), opens new tab had agreed to allocate 15% of China sales revenues to the U.S. government, aiming to secure export licences for semiconductors. "I don't know if that's going to be a good thing or a bad thing, but if it puts closure on the matter, it's not a bad outcome," Weston said. "If this is Trump saying 15% and we'll call it a day, that may not be too bad." The offshore yuan fluctuated between gains and losses, trading at 7.1854 to the dollar, after weekend data showed China's producer prices fell more than expected in July, while consumer prices were unchanged. The Australian dollar fetched $0.6520 , trading flat ahead of a rate decision by the central bank on Tuesday, in which it is widely expected to cut rates by 25 basis points to 3.60%, after second-quarter inflation came in weaker than expected and the jobless rate hit a 3-1/2-year high. Cryptocurrencies jumped, with bitcoin rising as high as $122,308, not far from its July 14 record of $123,153.22, after Trump's executive order on Thursday freed up cryptocurrency holdings in U.S. retirement accounts. Ether rose as high as $4,346, its highest since December 2021.
Reuters
6 minutes ago
- Reuters
India shuts unit at country's largest nuclear power plant for maintenance
New Delhi, Aug 11 (Reuters) - India has shut a unit at its Kudankulam nuclear reactor, the largest in the country, for scheduled maintenance last week, according to an outage report, possibly spiking power prices for southern regions. The 1,000 megawatt (MW) Unit 1 at Kudankulam in the southern state of Tamil Nadu was shut on August 3, the Central Electricity Authority, the country's power advisory body, said in a report dated August 7. Confirming that one unit of Kudankulam is under maintenance, a senior official with Tamil Nadu Distribution and Generation Company said the state might have to tap market sources if the need for additional demand arises. The official from the state government did not want to be identified as India's nuclear facilities are controlled by the federal government. Earlier, the Kerala State Electricity Board Ltd (KSEBL) filed a petition with the state's electricity regulator, saying the shutdown is expected to worsen the peak-hour electricity shortages in some southern states, driving up short-term power procurement costs. The 65-day outage, coupled with low volumes on power exchanges and increased demand from neighbouring states, had forced it to procure 300 MW of peak-hour power at rates as high as 9.18 rupees ($0.1048) per unit of electricity. The utility finalised purchases from Tata Power ( opens new tab at 8.75 rupees per unit and Greenko Energies at 9.18 rupees per unit for the slot between 07:00 PM IST and 00:00 AM IST slot throughout August, the petition showed. "The projected peak-hour deficit of around 600 MW in August 2025 may worsen due to the scheduled refuelling outage of the Kudankulam nuclear power plant," KSEBL said. Kerala's electricity regulator approved the emergency procurement but flagged concerns over the high tariffs. The other 1,000 MW unit 2 at Kudankulam is operating normally, according to the Tamil Nadu government official. India aims to expand nuclear capacity to at least 100 gigawatt by 2047, up from about 9 gigawatt currently. ($1 = 87.6212 Indian rupees)
