(Reuters) -India’s annual retail inflation slowed to 1.54% in September, an eight-year low, government data showed on Monday, leaving room for the central bank to cut rates one more time.
It was 2.07% in August, and below a Reuters poll of 1.7%.
COMMENTARY:
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“Headline inflation slipped below the RBI target band for the second time this quarter, on a seasonal correction in perishable food costs, with the segment declining on the year. Average 2QFY inflation was a shade below the central bank’s revised trajectory. Disinflationary impulse from indirect tax relaxation on most goods categories is likely to be more material in October’s print as changes kicked in by late September.”
“Global energy prices have also been subdued, offsetting the spillover risks from a weak rupee, while precious metals continue to stay buoyant, keeping core inflation above 4%. Growth and pipeline headwinds are likely to matter more to the central bank than the price outlook at this juncture.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The soft September CPI inflation continues to point towards the persistence of benign inflationary environment. While much of the moderation has been led by food prices, the core inflation has surged due to housing. We expect the pass through of GST cut to be more visible in the upcoming October reading likely pushing the print to sub-1%.”
“Overall the benign inflation and growth trajectory does provide room for 25-50bp rate cuts. However, the festive linked surge in retail sales may make it difficult to gauge the underlying sustainable demand in the economy and hence the timing of easing may become more difficult.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
“We expect the CPI inflation to average 2.6% in FY2026, dampened by the GST rationalisation as well as the continued benign food prices.”
“ICRA believes that a final 25 bps rate cut is possible in December 2025, with its timing contingent on the degree of further transmission of the cumulative 100 bps rate cuts to the credit market as well as growth implications of GST rejig and tariffs. We expect downward revisions in the expected growth trajectory to drive the rate cut decision, rather than the benign CPI inflation outlook, with the latter being driven by tax policy changes and not weaker demand.”
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“A sharper than expected drop in food prices culminated in an inflation print that is significantly lower than the lower band of RBI’s target range of 2.0-6.0%. That said, good news that the extremely benign inflation reading is, it is mainly on account of a rather high base effect that continues to play a significant role. Interestingly, even as food prices weakened further on a year-on-year basis, core inflation inched up suggesting building up of pricing pressure.”
“It is not too surprising, therefore, that RBI wants so to remain cautious. We expect the high statistical base effect to continue till October before its starts reversing significantly, thereby pulling up inflation. We would continue to keep an eye on how the GST rate cut translates into lower retail prices thereby keeping inflation in check. For the time being, we expect the RBI to announce a 25bp rate cut in the December meeting.”
RAJ SINGH, ECONOMIST, ANAND RATHI INSTITUTIONAL EQUITIES, MUMBAI
“While the deflation in vegetables and pulses steepened, the core inflation rose with housing inflation rising to 2-year high and personal care effect items at 19.4% y/y driven by rising prices of precious metals.
With the headline inflation likely to continue around 2% – the RBI has kept the option for rate cuts in future.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“We estimate that inflation could inch below 1% in October supported by GST rate cuts and lower food inflation. For the full year expect inflation to average at 2.5%. Inflation is expected to remain muted in Q3 FY26, before beginning to inch up towards 4% from Q4 onwards.”
“The continued downward move in inflation provides room for the RBI to cut the policy rate further if needed. If growth momentum disappoints — based on high frequency indicators during the festive season, the possibility of a 25bps cut in December remains high.”
(Reporting by Kashish Tandon, Komal Salecha, Nishit Navin and Aleef Jahan in Bengaluru, compiled by Chandini Monnappa; Editing by Mrigank Dhaniwala)
