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Business Standard
2 days ago
- Business
- Business Standard
India May inflation likely cooled to 3% as food price pressure eases: Poll
India's consumer inflation rate likely eased to a more than six-year low of 3 per cent in May thanks to a favourable base and a further moderation in food prices, a Reuters poll forecast, supporting last week's larger-than-expected interest rate cut. On Friday the Reserve Bank of India (RBI) stunned financial markets by slashing its key policy rate by 50 basis points, double what was predicted, to boost economic growth as inflation has remained subdued. The central bank, which targets inflation in the middle of its 2-6 per cent range in the medium term, also shifted its policy stance to 'neutral' from 'accommodative'. A snap Reuters poll after the decision found the RBI was likely done with cutting rates, wrapping up one of its shortest and shallowest easing cycles in more than a decade. The June 5-9 Reuters poll of 50 economists, published on Monday, forecast inflation measured by the annual change in the consumer price index (CPI) fell even further to 3.00 per cent in May from 3.16 per cent in April. That would mark the fourth consecutive month below the RBI's 4.0 per cent medium-term target, the longest such streak in nearly six years. It would also be the lowest inflation rate since April 2019, welcome news for many Indian households where food takes up a significant share of monthly expenses. Forecasts for the data due on Thursday at 1030 GMT ranged from 2.7 per cent to 3.7 per cent. "We are expecting a cooling of inflation to 3 per cent on a combination of a favourable base effect and... sequential moderation in prices of cereals and pulses even as most other segments started to strengthen," said Kanika Pasricha, chief economic advisor at Union Bank of India. "Prices of most food segments though continue to slide but the pace of correction is losing ground," she added. While concerns over widespread heatwaves raised fears of an inflation spike last month, a healthy harvest and the early arrival of monsoon rains helped ease those risks. "Even though there were heatwaves, I think the early monsoons across the country are likely to have cooled things off... most of the categories of food inflation seem to be contained," said Indranil Pan, chief economist at Yes Bank. Core inflation, which strips out volatile food and energy items and is seen as a better indicator of domestic demand, was expected to have edged up to 4.20 per cent year-on-year in May, from an estimated 4.00 per cent-4.10 per cent in April, the poll showed. India's official statistics agency does not publish core inflation data. Wholesale price index (WPI)-based inflation likely dipped to a 14-month low of 0.80 per cent in May from 0.85 per cent in April, the survey found. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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Business Standard
04-06-2025
- Business
- Business Standard
June RBI MPC expected to deliver third rate cut as inflation, growth ease
The Reserve Bank of India (RBI) is widely expected to lower its benchmark interest rate for a third consecutive time following its Monetary Policy Committee (MPC) meeting on June 6, as the central bank continues its shift towards a more accommodative stance to support economic growth. A Reuters poll conducted between May 19-28 shows a strong consensus among economists, with 53 out of 61 respondents expecting a 25 basis point (bps) cut in the repo rate to 5.75 per cent, while two projected a sharper 50 bps cut. The remaining six expect no change. The central bank has already cut rates by 50 bps this year, 25 bps each in February and April, and shifted its stance to 'accommodative' at its last meeting, citing subdued inflation and declining growth momentum. How much more will the RBI cut the repo rate? SBI Research projects a total cut of 125 bps in FY26, including 75 bps across June and August, followed by 50 bps in the second half of FY26. The report argues that jumbo cuts of 50 bps could prove more effective than incremental reductions. By August, over 80 per cent of economists in the Reuters poll expect the repo rate to reach 5.50 per cent, suggesting another quarter-point cut may follow soon after June. Why RBI MPC is likely to cut repo rate again? India's economic growth has slowed, with gross domestic product (GDP) expected to rise by 6.3 per cent in FY25. At the same time, inflation based on the Consumer Price Index (CPI) has eased to a multi-year low of 3.34 per cent in March and is likely to remain below the central bank's 4 per cent target. These factors give the MPC room to consider another reduction in the repo rate. However, some economists caution that transmission remains uneven. Yes Bank's Indranil Pan noted that the February rate cut did little to ease borrowing costs due to tight liquidity, even as deposit rates declined. While the RBI's policy is primarily shaped by domestic factors, global developments are increasingly influential. Central banks worldwide are shifting towards rate cuts amid slowing growth and rising geopolitical risks, with ongoing US-China trade tensions weighing on global demand and India's export outlook. Domestically, the OECD warns a weak monsoon could dent rural incomes and stoke food inflation, potentially constraining further easing. Even so, the outlook remains stable: growth is seen holding at 6.3 per cent in FY26 and rising to 6.5 per cent in FY27. Investor sentiment is upbeat, with a Reuters poll predicting new stock market highs by year-end. Overall, slowing growth, low inflation, and a global tilt towards easing strengthen the case for another rate cut, though the RBI is likely to proceed cautiously given the risks. What else to watch out for during RBI MPC June meet? While a 25 basis point cut in the repo rate to 5.75 per cent is widely anticipated, investors will also pay attention to the central bank's forward guidance for any hints of further easing in August or later. In addition, the RBI's inflation and growth projections will be announced for the ongoing financial year, as well as the central bank's assessment of potential monsoon-related risks to food prices. Measures to improve liquidity and address concerns over weak monetary transmission are also expected to be in focus.
Reuters
09-04-2025
- Business
- Reuters
India inflation in March likely steady after four months of decline
Summary Data due at 1030 GMT, April 14 BENGALURU, April 9 (Reuters) - India consumer prices likely rose around the same rate in March as they did in February following four months of declining inflation, as a sharp rise in gold prices offset flat food prices, a Reuters poll showed. Food price rises had steadily moderated over the previous four months but likely bottomed in March as the country's farm industry experienced uneven rainfall and heat waves. The Reuters Tariff Watch newsletter is your daily guide to the latest global trade and tariff news. Sign up here. The latest Reuters poll of 40 economists taken on April 3–8 showed inflation, as measured by the annual change in the consumer price index (INCPIY=ECI), opens new tab, was 3.60% in March, roughly unchanged from 3.61% in February. "We are expecting very flattish inflation for March," said Indranil Pan, chief economist at Yes Bank. "Vegetable prices have come down, though the drop is less on a month-on-month basis than we have seen in January and February... (but) higher gold prices will likely limit the fall in core inflation." Gold prices rose over 7% in March as investors sought a safe haven, bracing for U.S. President Donald Trump's sweeping trade tariffs. Core inflation, which excludes the more volatile food and energy components, was expected to have inched up to 4.1% year-on-year in March from February's estimated 3.9% to 4.0%. However, with inflation well within the Reserve Bank of India's 2-6% target range the central bank is expected to cut interest rates on Thursday and again in August to support already slowing economic growth. Meanwhile, warnings from the India Meteorological Department on country-wide heat waves have raised concerns about inflationary pressures. "As weather turns less supportive, and temperatures rise during summer months, vegetable and fruit prices are expected to start climbing seasonally," wrote Rahul Bajoria, head of India and ASEAN Economic Research at BofA Global Research. Forecasts for the inflation data, set to be released on April 14 at 1030 GMT, ranged from 3.2% to 3.9%. Wholesale price index-based inflation likely rose to 2.50% in March from 2.38% in February, the survey showed.
