(Corrects Kunal Kundu’s comment to say lower-than-expected inflation would give further ammunition to RBI to go for another “rate cut”, not “rate hike”)
(Reuters) -India’s annual retail inflation slowed to a more than six-year low of 2.10% in June, near the lower range of the central bank’s tolerance band, as food prices continued to ease, making a case for further interest rate cuts.
Inflation was lower than the 2.5% estimated by economists in a Reuters poll.
Retail inflation was at 2.82% in May.
COMMENTARY:
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“The lower-than-expected inflation print would give further ammunition to the RBI to go for another rate cut, given their neutral monetary policy stance suggesting data-driven approach.
We continue to expect two more rate cuts of 25bp each, resulting in a terminal rate of 5.0%.”
ARSH MOGRE, ECONOMIST, PL CAPITAL, MUMBAI
“While the CPI print gives the RBI significant room to manoeuvre, we do not expect an immediate policy pivot in August.
The MPC (Monetary Policy Committee) is likely to hold rates and wait for stronger growth signals – particularly from investment and export activity – before calibrating further action.”
“A rate cut in October remains our base case, contingent on continued inflation moderation and external stability.”
VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI
“India’s annualised food disinflation continues to depict higher momentum than envisaged, because of which the headline inflation print slipped to its lowest in 77 months.”
“Core inflation inched up to a 21-month high of 4.6% driven by higher price of precious metals, among others.
Although the sharp decline in headline inflation in recent months is a welcome respite, its growing divide with core inflation needs to be watched.”
“Overall, there is now a downside risk to our FY26 CPI inflation estimate of 3.5%.”
SACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI
“CPI numbers came in a tad lower than expectations with the base effect playing an important role along with a decline in food inflation, especially vegetables, cereals, pulses, etc.
A persistence of such trends could open up space for one more rate cut from the RBI in the second half of the year.”
SUVODEEP RAKSHIT, CHIEF ECONOMIST, KOTAK INSTITUTIONAL EQUITIES
“Overall, June CPI inflation print, along with the deflation in June WPI inflation, provides ample room for the RBI to lower the repo rate.”
“Average CPI inflation in FY2026 is likely to be much lower than the RBI’s estimate of 3.7%.
We continue to expect the RBI to pause in the August policy as it watches the monsoon outturn to ascertain the durability of food inflation trends. While earlier we were seeing room for a cut in the December policy, the June CPI print has increased the probability of the RBI reducing repo rate by 25 bps in the October policy.”
GAURA SEN GUPTA, CHIEF ECONOMIST, IDFC FIRST BANK, MUMBAI
“The moderation in inflation is led by a decline in food inflation.
Core inflation remains range-bound at 4.5%. The outlook for inflation remains favourable with strong start to Kharif sowing. Meanwhile, daily prices indicate moderation in vegetables prices month-on-month in July.”
“We continue to expect CPI inflation to average at 3% with downside risk.
This is below RBI estimate of 3.7% in FY26. There is space for one more 25bps cut in October or December.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“We expect full year CPI inflation to remain below the RBI’s full-year estimate of 3.7%, and hence do not rule out the possibility of another rate cut post the end of monsoon.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“June inflation rose by the slowest pace in six years, in line with our forecast at 2.1% year over year vs 2.8% the month before.
Despite the sequential rise in perishables especially vegetables, the broad food basket remained on a disinflationary path led by cereals and pulses, keeping headline inflation in check. The weak June inflation reading will feed into expectations that the RBI MPC could warm up to further cuts in this cycle.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The softer-than-expected headline inflation comes on the back of moderating food prices.
However, core inflation has ticked up. Overall, the high frequency mandi prices suggest food prices remain largely muted, except for few vegetable prices. We expect the FY26 inflation to undershoot RBIs estimates of 3.7% by 30-40 basis points.
While comfortable inflation opens room for further monetary easing, we expect the RBI to maintain a pause in the coming 1-2 meetings and remain watchful of the transmission ahead along with global uncertainties.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“CPI inflation edged further down in June on the back of lower food prices.
Given this print and ongoing momentum in food inflation, the annual average inflation for FY26 is likely to be lower than 3.7%.”
“While the Reserve Bank of India is likely to take comfort from Monday’s print, it does not change our expectation of a pause in the August policy as the central bank is likely to wait for growth signals before assessing whether further rate cuts are required.”
(Reporting by Hritam Mukherjee, Kashish Tandon, Meenakshi Maidas, Anuran Sadhu, Vivek Kumar and Manvi Pant; Compiled by Abinaya Vijayaraghavan and Eileen Soreng)
