Inflation's Soft Touch: A Case for RBI's Easing Policy
The November CPI review has sparked a wave of interest, with experts weighing in on the potential for further monetary easing by the Reserve Bank of India (RBI). Let's dive into the details and explore why this topic is creating quite a buzz.
India's headline CPI, a key inflation indicator, rose to a modest 0.71% year-on-year in November. This figure, while low, has significant implications. It marks the second consecutive month where CPI remained below 1%, a trend that has extended the period of sub-target inflation. The data paints a picture of a broadly stable inflation environment, with food prices continuing their downward trajectory and core inflation hovering around 4.3% to 4.25%.
But here's where it gets controversial...
BofA Global Research, a prominent player in the financial arena, has stated that the November CPI inflation was largely in line with their estimates. They highlight that inflation, despite being below 1%, has remained consistently under the RBI's 4% target for ten consecutive months. This has led them to predict a 25 basis point cut at the December MPC meeting, bringing the repo rate to 5.25%.
The research arm of Citi takes a similar stance, noting that while headline inflation ticked up to 0.71% in November 2025, it expects a further rise to 1.6% in December 2025. Citi forecasts an average headline inflation of 2.0% for FY26 and believes that even with some mean reversion in 2026, inflation will remain below the target in FY27, averaging at 3.8%.
Elara Capital and PhillipCapital also chime in, with Elara expecting CPI to undershoot the RBI's FY26 estimate by a small margin and PhillipCapital suggesting that the inflation path could lead to another 25 bp rate cut in February 2026.
And this is the part most people miss...
The consensus across these brokerages is that the current inflation environment is supportive of further easing by the RBI. This means that the central bank may opt for a more accommodative monetary policy to stimulate economic growth. However, it's important to note that this strategy could have its critics. Some may argue that easing monetary policy too much could lead to potential risks down the line. So, the question remains: Is this a wise move, or are we heading towards a potential economic conundrum?
What are your thoughts on this potential policy shift? Do you think the RBI's easing measures are justified, or is there a better approach to navigate these economic waters? Feel free to share your insights and opinions in the comments below!
