Archive

RBI Holds Rates Amid Trade Headwinds

• The RBI held its repo rate at 5.5%, unanimously keeping a neutral stance as the committee assesses the impact of prior cuts amid an improved inflation outlook.
• Inflation projections were slashed to 2.6% from 3.1%, driven by GST reforms and benign food prices, creating policy space despite growth risks from 50% US tariffs.
• Domestic demand raised the growth forecast to 6.8%, but H2 FY26 faces headwinds from trade tensions. The MPC adopts a wait-and-see approach before its next move.

No Alarm From Global Cycle

• Broad increases in the flash services PMIs reinforced the signal that global activity remains resilient enough not to require forceful monetary easing.
• Residual seasonality hasn’t appeared in the PMIs again this summer, but it pollutes some unemployment data. A slight majority of countries have a higher UR than a year ago.
• Softening labour market trends from a relatively neutral cyclical position are consistent with gradual and limited rate cuts, even if they need reversing without a recession.

By Philip Rush

India CPI Inflation 4.75% y-o-y (consensus 4.9%) in May-24

- India’s CPI inflation for May 2024 stood at 4.75% y-o-y, below the consensus forecast of 4.9%, marking the lowest growth since May 2023.
- Slowing CPI inflation and subdued wholesale price movements, particularly in the manufacturing sector, suggest a potential easing of inflationary pressures, offering economic relief and implications for monetary policy adjustments.

India CPI Inflation 4.83% y-o-y (consensus 4.8%) in Apr-24

- India's CPI inflation in April 2024 was broadly in line with expectations and the previous month at 4.83% y-o-y.
- However, this growth represents the lowest inflation rate since May 2023 and is below both the one-year average and long-run average, which could have significant implications for economic policies and decision-making.