Indian inflation falls to the third month, making a case for further reduction of rates
The Indian Central Bank held its key interest rate for the seventh direct meeting of politics on Friday, as the economy is expected to remain strong, while the inflation remains above the goal of 4%.
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Indian main inflation in January has fallen for the third month compared to 4.31%compared to a year, providing more space to alleviate financial mitigation after they have first reduced central bank rates In almost five years last week.
Reading in January was the lowest since August 2024, and below there were expectations of 4.6% of the economists surveyed by Reuters.
While the price growth has cooled on all sides, the inflation of food prices has significantly reduced with 7.69% in December to 5.68% in January. The annual growth of prices for vegetables recorded the highest drop from 26.56% in December to 11.35% in January.
“Looking in advance, good soil conditions, healthy tank levels and a high base means that we expect food inflation to continue to slow down over the coming months,” said Harry Chambers, an economist in the consulting capital economy. “And with economy in a softer patch, the fundamental pressures of the price should remain under control.”
The fall in inflation could clean the path for another rate that the India’s spare bank reduced, which reduced the Repo rap to 6.25% on Friday with 6.5% in an effort to increase the slowdown of economics.
The IRB is currently facing a dilemma because it seeks to increase growth in the third largest Asian economy, but reducing the stimulus rates could weaken the hole, which hit a record low level earlier this month and was under pressure due to a stronger dollar.
Indian currency, however, strengthened in the last two days, allegedly Because of the intervention from the central bank.
Said RBI Governor -Sanja Malhotra In his statement That the decision to reduce the rates is owed to the fall of inflation, which is expected to further moderate in 2025 and 2026. According to the bank’s goal of 4%.
A year -round growth for a fiscal year that ends March 2025 It is expected to reach 6.4%, according to government estimates, lower than 8.2% a year earlier. IRB also reduced growth forecasts for a liquid fiscal year to 6.4% – which aligned government’s odds. The bank had a growth of 6.6%in previous estimate.
“These dynamics of growth inflation open policy space for MPC [monetary policy committee] To support growth, staying focused on alignment of inflation with the goal, “Central Bank said on Friday.
