Inflation under control in FY27, but rate cut only when necessary for growth: Report – Obnews

According to a recent report by HSBC Global Investment Research, inflation in India is expected to moderate by FY27 due to adequate food stocks, low global oil prices and persistent core inflation downward trends.

Headline CPI inflation in November rose marginally to 0.71% year-on-year from October’s record low (in line with expectations), driven by a high base effect and sustained growth. Food prices remained in deflation for the third month running (-3.91% year-on-year), although vegetables, eggs, meat and fish saw sustained increases. After a huge decline in October, inflation of goods remained low.

Gold prices, which have 1.1% weightage in the CPI basket and have risen ~59% year-on-year, contributed about 63 basis points to headline inflation. HSBC’s preferred core measure (excluding food, fuel, housing and gold) declined to 2.5% from 3.2% in November.

Strong grain production, well-stocked warehouses, winter seasonal effects, favorable base effect, low Brent crude and cheap sugar imports are expected to ease food and core pressures in the near term.

The Reserve Bank of India recently reduced its CPI forecast for the first half of FY27 by 50 basis points to 4%. HSBC’s forecast is lower at around 3.5%, leaving room for further monetary easing – if necessary – to support growth.

The report said: “We do not forecast further RBI repo rate cuts, but if there is a risk, it is of further easing if growth does not materialize as expected.” This reflects a data-driven stance amid strong economic momentum and very low inflation, positioning India for balanced macroeconomic stability in the coming fiscal year.