India inflation eases further, boosting rate cut hopes

[NEW DELHI] India’s inflation eased to a seven-month low in February, aligning with the central bank’s target and raising hopes of further interest rate cuts. 

The consumer price index rose 3.61 per cent last month from a year earlier, data from the statistics ministry showed on Wednesday (Mar 12). That compares with a 3.98 per cent increase predicted by economists in a Bloomberg survey and a reading of 4.3 per cent in January.

Easing inflation will provide space for policymakers to reduce borrowing costs as economic growth stutters. The Reserve Bank of India had lowered its benchmark rate for the first time in almost five years last month, with rate-setters drawing comfort from softening price gains. 

Most economists in a separate Bloomberg survey forecast the RBI to lower rates by another 50 basis points in 2025 to shore up demand.

However, a weaker currency adds to the RBI’s challenges as it puts pressure on prices. The rupee is among the worst-performing currencies across emerging markets in the year so far, according to data compiled by Bloomberg.

Data released separately showed the index of industrial production grew 5 per cent in January, compared with a revised reading of 3.5 per cent the previous month. BLOOMBERG