India’s inflation rate fell to 3.61% in February, lower than the expected 3.98%, according to the Ministry of Statistics and Programme Implementation. This is the first time since mid-2024 that inflation has dropped below the Reserve Bank of India’s (RBI) 4% target.

The decline was mainly due to falling vegetable prices, which dropped 1.07% annually, compared to an 11.35% rise in January. Prices of pulses also decreased by 0.35%. However, cereal prices remained high, increasing by 6.1%.

Analysts warn that vegetable prices may rise again in March due to possible heatwaves and weather-related disruptions.

With economic growth slowing to 6.5% for the financial year (compared to 9.2% the previous year), the RBI may consider further interest rate cuts. In February, it reduced the repo rate by 25 basis points to 6.25%, marking the first cut in nearly five years.

Experts predict the RBI may cut rates by another 100 basis points by the end of 2025, bringing the repo rate to 5.5%. However, global economic uncertainties and a strong U.S. dollar continue to pose challenges for India’s financial markets.

Source: CNBC