June inflation hit 1.6% year-on-year, an eight-year low, driven by mild food, energy declines, easing core inflation
New Delhi
The Reserve Bank of India (RBI) could lower the repo rate by 25 basis points in the fourth quarter of 2025 if recent moderate economic trends continue, HSBC Global Investment Research said in a report on Wednesday. This would reduce the policy rate from 5.50 per cent to 5.25 per cent.
The RBI kept rates unchanged in its August meeting after a major cut in the previous session. HSBC noted that while the central bank’s strong one-year growth and inflation forecasts suggest caution, weaker high-frequency indicators may prompt a downward revision and a rate cut.
June data showed inflation at 1.6 per cent year-on-year — an eight-year low — with mild food price increases, energy price declines, and easing core inflation. Sequential momentum was just 0.1 per cent, and the six-month average has been flat. CPI inflation for FY26 is projected to average 3.2 per cent, supported by favourable base effects, good crop sowing, full granaries, and soft global commodity prices.
Food inflation turned positive after six months, up 0.2 per cent, as vegetable prices rose faster than expected. Prices of pulses, sugar, and fruits fell, offsetting costlier edible oil, eggs, meat, fish, and vegetables. Cereal prices continued to contract for the second month. Energy prices dropped 0.7 per cent month-on-month, with lower petrol, diesel, electricity, and LPG costs driving the decline. HSBC said continued weakness in economic activity could convince the RBI to ease further, despite earlier caution.
