India Inflation Weakens More Than Forecast To Lowest Level In 5 Months

(RTTNews) - India's consumer price inflation slowed more than expected to a five-month low in January reinforcing expectations that the Reserve Bank of India will reduce interest rates further.

The consumer price index registered an increase of 4.31 percent on a yearly basis in January, weaker than the 5.22 percent rise logged in December, official data revealed on Wednesday. The inflation rate was below economists' forecast of 4.60 percent rise.

This was the lowest rate since August 2024, when inflation was 3.65 percent.

At the same time, food price inflation slowed more markedly to 6.02 percent in January from 8.39 percent in the previous month. This was the weakest since August 2024.

On a monthly basis, overall consumer prices slid 0.97 percent and food prices declined 2.9 percent.

The sharp fall in inflation reinforces the assessment that the Reserve Bank of India will continue to loosen monetary policy over the coming months to support the economy, Capital Economics' economist Harry Chambers said.

The economist expects another 75 basis points of reduction over the rest of this year, bringing the repo rate down to 5.50 percent.

Last week, the RBI decided to cut its key interest rate for the first time in nearly five years and to maintain a neutral policy stance. The repo rate was lowered by a quarter-point to 6.25 percent.

The Reserve Bank sees consumer price inflation for 2024-25 at 4.8 percent and forecast it to ease to 4.2 percent in 2025-26.

Elsewhere on Wednesday, industrial production data suggested a slowdown in growth towards the end of 2024. Industrial output growth softened to 3.2 percent in December from 5.0 percent in November, reflecting the slowdown in manufacturing.