Beneath the headline number, however, a clearer disinflation trend appears to be taking hold, strengthening the argument for further monetary policy easing, according to leading economists.
Speaking to CNBC-TV18, Sakshi Gupta, Senior Economist at HDFC Bank
, said the latest data “reinforces the view that inflation pressures are cooling across key categories,” noting that GST rate cuts continue to suppress core and miscellaneous inflation. Core inflation excluding gold now stands at just 2.6% year-on-year, she added.
Gupta expects inflation to remain comfortably within the RBI’s target range across the next two quarters. “For Q3, we are expecting an average of close to 0.6%. For Q4, we are looking at sub-2.5%. And next year, Q1 and Q2 are again going to be close to 3.3–3.4% based on the current series,” she said.
Given this trajectory, Gupta believes there is “clear space for the RBI” to reduce the policy rate further, potentially bringing the repo rate down to 5%. “Inflation gives them room, and on the growth front, there is uncertainty around the trade deal and questions on whether festive-season momentum can sustain. In that environment, the RBI may lean towards supporting growth,” she added.
Kanika Pasricha, Chief Economic Advisor at
Union Bank of India, echoed the view that inflation ex-gold remains well-contained, even as imported gold continues to distort headline and core readings. She noted that although the rupee has weakened by nearly 3% between mid-November and mid-December, the inflationary impact of the depreciation may be limited because retail fuel prices remain frozen and oil marketing companies have a buffer from over-recoveries.
From a markets standpoint, however, the conversation has already moved beyond inflation. Bond yields have remained largely stable near 6.61%, with investors focused instead on the heavy supply expected in the fourth quarter. Anurag Mittal, Head of Fixed Income at UTI AMC, warned that state development loan (SDL) borrowing of ₹4.5–5 lakh crore and next year’s projected gross borrowing of around ₹16 lakh crore could cap expectations of aggressive easing.
“With this kind of supply and inflation projected at close to 5% in the second half of next year due to base effects, forward-looking easing is limited. We are likely in a lower-for-longer setup,” Mittal said.
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Sameer Narang, Head of Economics Research Group at ICICI Bank, added that the outlook will depend heavily on how much demand the market can absorb during the peak borrowing period. The upcoming Budget and the anticipated Bloomberg bond index inclusion—potentially drawing $20–25 billion of inflows—will also shape overall liquidity.
Still, with inflation moderating and domestic growth showing early signs of softening, the window for monetary easing may remain open. As Gupta noted, “The inflation path is benign, the growth outlook carries uncertainties, and the RBI has the room to act. The question now is timing.”
Watch accompanying video for entire discussion.
