Room for more easing ahead

During its June meeting, the monetary policy committee (MPC) surprised with an outsized 50 basis points (bps) repo rate cut, a large cash reserve ratio (CRR) reduction, and a pivot back to "neutral" stance from "accommodative".

- SIDDHARTHA SANYAL

After such a large and multi-pronged monetary easing, the likelihood of further rate cut soon appeared slim. However, more recent geopolitical developments and evolving growth-inflation dynamics seem to have enhanced the probability of more easing in the near future.

Since June, retail inflation sprang fresh downside surprises to reach a six-year low of 2.1 per cent year-on-year (Y-o-Y). Average consumer price index (CPI) inflation in 2025-26 will likely undershoot the Reserve Bank of India's (RBI's) downwardly revised projection of 3.7 per cent. Core inflation stayed well within the RBI's comfort zone. The wholesale price index (WPI) also slipped into deflation for the first time in two years.