Distant prospects of easing policy rates in India, US keeps duration segment unattractive India’s Jun’25 headline inflation came in at 2.10% - towards the lower end of the RBI’s inflation comfort zone. This was the softest reading since Jan 2019. However, markets witnessed limited respite from this reading. We believe this was largely to do with a favorable base effect or a high base effect of last year along with continued monthly disinflation in food items– pushing this time’s reading lower. This trend is less likely to sustain for long once the base effect fades and as vegetable prices start rising once again. Hence, a single Jun reading is less likely to move the needle in terms of rate easing expectations from the central bank (this was also communicated by the RBI governor Malhotra in his recent comments with a media agency, when he clarified that the central bank would rather look at the inflation trajectory instead of a singular reading). The headline inflation for Jul and August may be on the higher side on account of a low base on food and beverages (same time last year).
