India’s CPI inflation decelerated more than expected, to a 7-month low of 3.61% in Feb-25.
Download ReportQuantEco Research || Feb-25 CPI: A faster cool off
The downside in CPI inflation at 3.61% in Feb-25 was expectedly led by food prices. In contrast, core CPI inflation moved higher to 4.3%YoY - a 16-month high, led by Personal care and effects sub-category, within which Gold, Silver and other ornament prices registered a significant upside. Looking ahead, we expect broad comfort on food prices to continue into FY26, with food inflation trajectory gradually descending lower, as lagged benefits from a strong 2024-25 foodgrain production continue to manifest. In addition, the recent correction in global crude oil prices offers comfort. For FY26, assuming a normal and evenly distributed monsoon season, we expect disinflationary momentum to prevail and hence maintain our CPI inflation forecast at 4.3%. From RBI’s perspective, the comfort that Feb-25 CPI inflation offers, cements our view of a further 25 bps reduction in repo rate at the Apr-25 policy, accompanied by a change of stance to accommodative from neutral.