New Delhi
The Reserve Bank of India (RBI) may ease interest rates further after a short pause, as additional liquidity could be needed in the second half of FY26, according to Angel One's Ionic Wealth report. The RBI has already revised its FY26 inflation target to 3.7%, with Q1 inflation projected at 2.9%. So far, April and May inflation figures are closely aligned with this target.
The report stated, We maintain our view that RBI will ease more after a brief pause, and more liquidity support may be required in H2. Consumer Price Index (CPI) inflation fell to 2.82% in May 2025 from 3.16% in April. On a monthly basis, it dropped by 35 basis points. Core inflation also dipped slightly to 4.28% in May, down from 4.36% in April.
This decline gives the RBI more flexibility to support growth, though global uncertainties like geopolitics and trade agreements could still affect inflation. The report cautioned about potential risks from imported inflation.
A major reason for the inflation dip was easing food prices. Food inflation dropped to 0.99% in May from 1.78% in April. This was driven largely by a sharp 13.7% year-on-year fall in vegetable prices and an 8.2% decline in pulse prices. Cereal inflation also slowed to 4.7% from 5.4% in April.
The moderation in food prices was attributed to better supply, thanks to a strong rabi harvest and good sowing conditions for the upcoming kharif season.
