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Time of India
4 days ago
- Business
- Time of India
Economists split on interest rate cuts as inflation hits six-year low
Mumbai: Economists are divided on the trajectory of interest rate cuts . While some cite six-year low inflation as grounds for another rate cut in the upcoming August policy, the majority advocate for maintaining the status quo. Those calling for a pause argue that it is prudent to wait and assess inflation trends in the coming quarter and monitor developments around the US trade deal. Economists shared these perspectives with the Reserve Bank of India governor Sanjay Malhotra , deputy governor Poonam Gupta and her team during customary pre-policy consultative meetings held last week. Explore courses from Top Institutes in Please select course: Select a Course Category Public Policy Management MCA PGDM MBA Data Science Technology Project Management healthcare Healthcare Cybersecurity Degree Artificial Intelligence Data Analytics Finance Data Science Others Design Thinking CXO Product Management Operations Management Leadership Digital Marketing others Skills you'll gain: Economics for Public Policy Making Quantitative Techniques Public & Project Finance Law, Health & Urban Development Policy Duration: 12 Months IIM Kozhikode Professional Certificate Programme in Public Policy Management Starts on Mar 3, 2024 Get Details Skills you'll gain: Duration: 12 Months IIM Calcutta Executive Programme in Public Policy and Management Starts on undefined Get Details Since February, the RBI has lowered the repo rate by 100 basis points, or a percentage point, to 5.5%. It has also announced lowering cash reserve ratio by 100 bps in a phased manner beginning September 2025, which is estimated to release ₹2.5 lakh crore in the banking system. When the central bank's six-member Monetary Policy Committee (MPC) meet from August 4 to 6, it is expected to deliberate on the policy repo rate using two key data points: the June quarter GDP projections and the latest retail inflation figures. Consumer Price Index-based inflation slowed to 2.1% in June, well below the RBI's medium-term target of 4%. Meanwhile, estimates suggest that economic growth for the April-June 2025 quarter is tracking above the RBI's projection of 6.5%. Live Events "After having given a steroid dose in the last policy (a 50-bps repo reduction in June), why cut when growth is not faltering? The timing also is not very convincing; there is a lot of uncertainty trade policy-wise and a lot of things are impending," said an economist who attended one of the RBI meetings. Ratings firm ICRA expects GDP growth to be between 6.0% and 6.5% in the first quarter of fiscal 2026, according to a report published last week. IDFC First Bank does not expect any revision to the RBI's FY26 GDP estimate of 6.5%, saying "High frequency indicators continue to show moderation in urban consumption." Official GDP data for the quarter is expected in late August. "We maintain a view of a pause on rates. A 25-bps cut would likely cause real rates (based on 12M ahead inflation) to fall sharply for FY27-which the MPC would prefer to avoid," said Anubhuti Sahay of Standard Chartered in a report published on July 22. Speaking at an event on Friday, governor Malhotra reiterated that price stability remained the central bank's primary objective. He remarked that while the RBI has won the "battle" against inflation, the war continues. Given the forward-looking nature of monetary policy, decisions will be based on data reflecting a six-to 12-month outlook rather than current figures. "Monetary policy, being data driven and more on the outlook, will be guided by the revised numbers, if any, and take a call," Malhotra said. The RBI has projected retail inflation to be 3.7% for the current fiscal year, though the projection for the fourth quarter remains above 4% at 4.4%. "It may be, you know, revised downwards given the fact that the numbers that are coming in are lower than what we had projected even for Q1," Malhotra added. "If the food prices are lower, inflation would be around 4%. It's all statistical right now, and the base effect would be revised next year and because of low food inflation now, it could lead to lower inflation in Q1FY27," said another economist who has conveyed to the RBI that a rate cut in August would benefit the economy. DBS Bank expects another 50-bps rate cut this calendar year, with half that in August. "The ongoing disinflationary phase, coupled with moderation in growth indicators, provides room for the central bank to frontload rate cuts... Factoring in the current inflation series, we expect unfavourable base effects to prop FY27 inflation to average 4.3% yoy vs 3.0% in FY26," Radhika Rao of DBS Bank said in a report published on July 25 The RBI will release its inflation projections for Q1FY27 for the first time on August 6.
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Business Standard
15-07-2025
- Business
- Business Standard
Comfortable position: Low inflation may not lead to another rate cut
Prices of oils and fats, for example, increased by over 17 per cent and may require policy attention premium Business Standard Editorial Comment Mumbai Listen to This Article The data released on Monday showed that the Consumer Price Index-based inflation rate declined to 2.1 per cent in June, as against 2.8 per cent in May. The decline was largely driven by lower food prices. The all-India Consumer Food Price Index declined by 1.06 per cent, mainly because of lower vegetable prices, which dropped by 19 per cent. Given the forecast of a good monsoon, food prices are expected to remain in check. However, it is worth noting that within the food segment, the moderation in prices is not uniform. Prices of oils and fats, for example, increased by
Mint
15-07-2025
- Business
- Mint
RBI reviewing bank ownership rules, may allow foreign lenders to hold 26% stake
The Reserve Bank of India (RBI) is reviewing its norms on bank ownership, which may include allowing foreign banks a greater stake in local lenders, Governor Sanjay Malhotra said on Tuesday. The central bank will examine if foreign banks can be allowed to own 26 per cent in local banks 'as a general matter of policy', the governor said. Currently, while foreign investors, including portfolio investors, can own up to 74 per cent in Indian banks, regulations cap a strategic foreign investor's stake at 15 per cent. However, the RBI can review and allow a request by an investor to raise the stake to 26 per cent. These aspects will be addressed in the review as the RBI streamlines the norms, he said. According to a Bloomberg report, when asked whether the regulator would reverse its age-old concerns on letting business conglomerates own banks, the governor said, 'Conducting business and real economic activities within the same group has conflict of interest.' Malhotra also said an internal committee of the RBI has reviewed the existing liquidity management framework and it will release a report by the end of this month detailing the findings. The RBI will consider cutting interest rates further if inflation falls below its projection or growth comes under pressure in Asia's third-largest economy, Governor Malhotra said. 'The monetary policy committee will always factor in the evolving situation, the outlook, and then decide what the economy really needs,' Malhotra said in an interview with CNBC-TV18 on Tuesday. 'Certainly, the policy rates can be cut' if inflation is lower than the central bank's forecast or growth remains weak, he added. Retail inflation declined to over six-year low of 2.1 per cent in June, nearing the RBI's comfort zone, on account of subdued prices of food items, including vegetables, driven by widespread monsoon. The Consumer Price Index-based inflation was 2.82 per cent in May and 5.08 per cent in June 2024. Inflation is on a decline since November 2024. Year-on-year inflation rate based on CPI for the month of June 2025 over June 2024 is 2.1 per cent, the National Statistics Office (NSO) said in a statement. (With inputs from agencies)
Mint
15-07-2025
- Business
- Mint
Stock markets cut short four-day decline; Sensex rises 317 pts on gains in auto, pharma shares
Mumbai, Stock markets snapped the four-day falling streak on Tuesday with the benchmark Sensex rebounding by 317 points on buying in auto and pharma shares amid a decline in retail inflation to a more than six-year low, nearing the RBI's comfort zone. The 30-share BSE Sensex climbed 317.45 points or 0.39 per cent to settle at 82,570.91. During the day, it jumped 490.16 points or 0.59 per cent to 82,743.62. The 50-share NSE Nifty edged higher by 113.50 points or 0.45 per cent to 25,195.80. In the last four trading days, the Sensex dropped 1,459.05 points or 1.74 per cent and the Nifty declined by 440 points or 1.72 per cent. Among Sensex firms, Sun Pharma, Trent, Tata Motors, Bajaj Finserv, Mahindra & Mahindra and Bajaj Finance were the major gainers. However, HCL Tech declined 3.31 per cent after the IT services firm reported a 9.7 per cent drop in consolidated net profit for the June quarter, hurt by higher expenses and the one-time impact of a client bankruptcy. Eternal, Tata Steel, Kotak Mahindra Bank and Axis Bank were also the laggards. Retail inflation declined to over six-year low of 2.1 per cent in June, nearing the RBI's comfort zone, on account of subdued prices of food items, including vegetables, driven by widespread monsoon. The Consumer Price Index-based inflation was 2.82 per cent in May and 5.08 per cent in June 2024. Inflation is on a decline since November 2024. "Market sentiment is showing signs of improvement, supported by a blend of global and domestic developments. Optimism is growing around the possibility of an interim trade agreement with the US, which could lead to a moderation in tariff-related risks. "Concurrently, domestic inflation has fallen to multi-year lows, strengthening expectations of a further rate cut by the RBI—potentially accelerating future economic growth, which is currently showing signs of improvement," Vinod Nair, Head of Research, Geojit Investments Limited, said. In Asian markets, South Korea's Kospi, Japan's Nikkei 225 index and Hong Kong's Hang Seng settled in the positive territory while Shanghai's SSE Composite index ended lower. European markets were trading in the green. The US markets ended in positive territory on Monday. Global oil benchmark Brent crude dipped 0.17 per cent to USD 69.09 a barrel. Foreign Institutional Investors offloaded equities worth ₹ 1,614.32 crore on Monday, while Domestic Institutional Investors bought stocks worth ₹ 1,787.68 crore, according to exchange data. On Monday, the Sensex dropped by 247.01 points or 0.30 per cent to settle at 82,253.46. The Nifty settled lower by 67.55 points or 0.27 per cent to 25,082.30. This article was generated from an automated news agency feed without modifications to text.
The Print
15-07-2025
- Business
- The Print
Retail inflation eases to over 6-yr low of 2.1 pc in June on subdued food prices
Year-on-year inflation rate based on CPI for the month of June 2025 over June 2024 is 2.1 per cent, the National Statistics Office (NSO) said in a statement. The Consumer Price Index-based inflation was 2.82 per cent in May and 5.08 per cent in June 2024. Inflation is on a decline since November 2024. New Delhi, Jul 14 (PTI) Retail inflation declined to over six-year low of 2.1 per cent in June, nearing the RBI's comfort zone, on account of subdued prices of food items, including vegetables, driven by widespread monsoon. 'There is a decline of 72 basis points in headline inflation of June 2025 in comparison to May 2025. It is the lowest year-on-year inflation after January 2019,' it said. The previous low of 1.97 per cent was recorded in January 2019. The NSO said the significant decline in headline inflation and food inflation in June 2025 is mainly attributed to favourable base effect and decline in inflation of vegetables, pulses and products, meat and fish, cereals and products, sugar and confectionery, milk and products and spices. The Reserve Bank, which has been tasked to ensure inflation remains at 4 per cent (with a margin of 2 per cent on either side), has cumulatively reduced the key short-term lending rate by 100 basis points since February in the wake of slowing retail inflation. Meanwhile, the wholesale price inflation (WPI) turned negative after a gap of 19 months, declining 0.13 per cent in June as deflation widened in food articles and fuel, along with softening in manufactured product costs. WPI-based inflation was 0.39 per cent in May. It was 3.43 per cent in June last year. 'Negative rate of inflation in June, 2025 is primarily due to decrease in prices of food articles, mineral oils, manufacture of basic metals, crude petroleum & natural gas etc,' the industry ministry said in a statement. As per WPI data, food articles saw a deflation of 3.75 per cent in June, as against a deflation of 1.56 per cent in May, with vegetables seeing a sharp drop. According to the NSO data on CPI, the annual inflation in the food basket during June 2025 over June 2024 was (-) 1.06 per cent. A sharp decline of 205 basis points is observed in food inflation in June 2025 in comparison to May 2025. The food inflation in June was also the lowest after January 2019. The inflation rural was lower than the national average at 1.72 per cent while it was higher in urban areas at 2.56 per cent. The lowest inflation was in Telangana (-0.93 per cent) and the highest in Kerala (6.71 per cent). On all India basis, the annual inflation was negative in vegetables (-19 per cent), 'meat and fish' (-1.62 per cent), 'pulses and products' (-11.76 per cent), and spices (-3.03 per cent). Commenting on the CPI data, Aditi Nayar, Chief Economist, ICRA, said the cooling was entirely led by the food and beverages (F&B) segment, which witnessed a deflation of 0.2 per cent after a gap of 75 months, after printing at 1.5 per cent in the previous month. 'The CPI inflation eased for the eighth consecutive month to a softer-than-expected 2.1 per cent in June 2025 from 2.8 per cent in May 2025, touching the lowest level since January 2019. We are not ruling out the possibility of a final 25 bps rate cut in the August 2025 meeting, carrying forward the front-loading seen in June 2025,' Nayar said. Paras Jasrai, Associate Director at India Ratings and Research, said that notwithstanding the deflationary turn of food items, core inflation increased to 4.4 per cent in June 2025, the highest since September 2023. 'A closer look indicates that it was largely on account of an uptick in inflation of jewellery items. Inflation of gold increased to a 58-month high of 36 per cent (as geopolitical tensions flared up in the Middle-East), the inflation of silver and other ornaments was also at elevated levels of 17.8 per cent and 21.5 per cent, respectively, in June 2025,' Jasrai said. Garima Kapoor, Economist and Executive Vice President, Elara Capital, said the CPI inflation for June cooled to a six-year low led by moderating food prices and aided by a high base. 'We expect full year CPI inflation to remain below RBI's full year estimate of 3.7% and hence do not rule out the possibility of another rate cut post-end of monsoon,' Kapoor said. The NSO collects the price data for CPI from selected 1,114 urban markets and 1,181 villages covering all States/UTs. PTI NKD CS MR MR This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
