Inflation in the current and the next financial year (FY27) is likely to be significantly lower than the Reserve Bank of India’s (RBI) present estimates, according to a report released by the State Bank of India (SBI).
This optimistic outlook is driven by several domestic factors which are set to ease price pressures in the upcoming period, including a healthy monsoon, higher kharif sowing, adequate reservoir levels, a comfortable buffer stock of food grains, and the major impact of GST rate rationalization.
Monetary policy stance and future rate cuts
The Monetary Policy Committee’s (MPC) decision to hold the policy rate unchanged is a logical move, given the backdrop of global economic uncertainty and volatile financial markets, the SBI report noted.
The report also noted that the MPC’s status quo decision was characterised as a rare form of dynamism, facilitated by comfortable liquidity conditions in the financial system and a benign external sector despite ongoing trade-led uncertainties.
