The Reserve Bank of India (RBI) may not hurry to cut interest rates despite the easing trend in the Consumer Price Index (CPI) numbers as global uncertainties weigh, experts said.
In March, India's headline retail inflation rate eased to a nine-month low of 4.85 percent, according to data released by the Ministry of Statistics and Programme Implementation on April 12.
The Consumer Price Index (CPI) inflation print in February was 5.09 percent.
“Global factors such as the US Fed staying on prolonged and higher global commodity prices, have increased the chances of a likely delay in RBI rate cut cycle,” said Gaura Sengupta, economist at, IDFC First Bank.
Sakshi Gupta, Principal Economist, HDFC Bank said the expectation of heat waves could present further upside risks to vegetable prices. This combined with the recent increase in commodity prices, supports the recent caution by the RBI on the disinflationary trend.
“We expect the central bank to cut rates not before Q3 FY25,” Gupta added.
At 4.85 percent, the latest headline retail inflation figure is the lowest since June 2023 when it came in at 4.81 percent.
Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA expects food and beverages inflation to remain above the 7.0 percent mark in April 2024.
Food inflation softened marginally with the index coming in at 8.52 percent as compared to 8.66 percent in previous month.
On the up were prices of cereals at 8.37 percent versus 7.60 percent a month ago, and meat and fish at 6.36 percent compared to 5.21 percent in March. Meanwhile, vegetables and pulses exhibited a marginal declining trend.
In total, the food and beverages inflation stood at 7.68 percent in March, lower than 7.76 percent in February.
Core inflation, which excludes volatile components such as food and fuel remained steady at 3.5 percent, as per ICRA's Nayar.
In April monetary policy, the central bank kept repo rate unchanged at 6.5 percent for the seventh time in a row, in line with the market expectations, with its focus firmly on bringing inflation down.
In its first meeting of FY 25, the rate-setting panel left the stance unchanged as withdrawal of accommodation. The decisions were takes with a 5:1 majority.
Repo is the rate at which the central bank lends money to banks for the short term.
The RBI has projected CPI inflation for 2024-25 at 4.5 per cent, with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent.
" Going ahead, food price uncertainties would continue to weigh on the inflation outlook," RBI governor said during monetary policy review.
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