Logo

India's Inflation Cools to 2.82% in May, Easing Pressure on RBI Rates

India's consumer inflation cooled to 2.82% in May, the lowest since 2019, driven by falling food prices. The Reserve Bank of India responded with a surprise 50 basis-point rate cut, marking its third reduction this year to stimulate growth. Economists foresee further easing as the economy grows stronger than expected. Ongoing trade talks with the U.S. aim to ease tariffs and boost exports.

India's Inflation Cools to 2.82% in May, Easing Pressure on RBI Rates

India's Inflation Dips to Lowest in Over Four Years

India's headline inflation eased to an unexpectedly low 2.82% year-on-year in May, marking the softest reading since February 2019. This data, released by the Ministry of Statistics and Programme Implementation, came in below market expectations of 3%, reflecting a significant slowdown in price pressures.

Food Prices Lead the Decline

The easing was primarily driven by a sharp slowdown in food inflation, which fell to 0.99% in May from 1.78% in April. Vegetable prices notably declined by 13.7%, while cereal prices rose moderately by 4.77%. This drop in food costs played a major role in tempering overall inflation.

Monetary Policy Shifts as Inflation Softens

Amid this cool-down in inflation, the Reserve Bank of India (RBI) has taken a more accommodative stance by easing monetary policy. Just last week, the RBI surprised markets with a substantial rate cut, lowering its benchmark repo rate by 50 basis points to 5.50%. This is the third consecutive rate reduction since February, signaling a clear pivot towards stimulating economic growth.

RBI Governor Sanjay Malhotra highlighted that the decision was influenced by the softening inflation trend combined with economic growth that has so far been "lower than our aspirations," compounded by global uncertainties.

Economists Anticipate Further Rate Cuts

Economists from Nomura forecast a sustained subdued inflation at around 3.3% for the fiscal year 2026, thanks to easing commodity prices, slowing economic activity, and an influx of affordable Chinese imports. They anticipate two additional repo rate cuts of 25 basis points each in October and December, potentially bringing the terminal rate down to 5%.

Economic Growth Outpaces Expectations

India’s economy surprised on the upside, expanding faster than expected recently with growth exceeding the 6.7% forecast by economists. For the full fiscal year 2025, the growth aligned closely with government projections, and the RBI remains optimistic about a robust 6.5% expansion through March 2026.

Ongoing Trade Talks with the U.S.

Meanwhile, India is navigating trade tensions as it faces a potential 26% tariff on its exports to the United States. Efforts to secure a bilateral trade agreement ahead of a July deadline are underway. Early discussions reportedly focus on improving market access for industrial and select agricultural products, alongside reducing tariffs and non-tariff barriers.

Looking Ahead

With inflation easing and economic growth holding steady, India appears positioned for a period of monetary support aimed at invigorating its economy amidst global uncertainties. Watchers will be closely monitoring how these policy measures, trade negotiations, and external factors influence the trajectory in the months to come.

Rupee Volatility May Rise Post US Tariff Pause Expiry, Experts Warn
Rupee Volatility May Rise Post US Tariff Pause Expiry, Experts Warn

With the upcoming expiration of the U.S. President's 90-day tariff pause, the Indian rupee's recent stability may give way to greater volatility after the first half of fiscal 2026. MUFG predicts an appreciation to 83 per dollar with a potential trade deal, while Indian analysts expect fluctuations between 84-86 per dollar, emphasizing increased volatility starting September. RBI's actions will be crucial in managing these trends.

Japan’s Rising Bond Yields Raise Fears of Capital Outflows and Market Volatility
Japan’s Rising Bond Yields Raise Fears of Capital Outflows and Market Volatility

Yields on Japan’s long-term government bonds have reached near-record highs, fueling fears of capital repatriation by Japanese investors from the U.S. and potential disruptions in global financial markets. Experts warn that rising yields and a strengthening yen could unwind the yen carry trade, impact U.S. equities, and tighten global liquidity conditions. While some foresee a gradual adjustment, the evolving bond market dynamics warrant vigilant observation given their broad economic implications.

Australia's Consumer Inflation Steady in April with Rate Cuts Expected
Australia's Consumer Inflation Steady in April with Rate Cuts Expected

In April, Australia's consumer inflation rate remained stable at 2.4% year-over-year, with increased health and holiday expenses balanced by lower fuel costs. Core inflation measures stayed within the Reserve Bank's target range of 2-3%. The resilient labor market and slowing rent growth bolster expectations for potential interest rate cuts in July amid ongoing global economic uncertainties.

India Set to Drive Global Growth in 2025 and 2026, WEF Report Finds
India Set to Drive Global Growth in 2025 and 2026, WEF Report Finds

The World Economic Forum's Chief Economists Outlook identifies India as the primary engine of growth in 2025 and 2026, amid a mixed global economic climate. While North America faces weak prospects, South Asia remains robust, with India expected to grow over 6% annually. Global risks include trade shocks, rising public debt, and AI-driven job disruptions.

US Holds Over One-Third of Global Millionaires and Billionaires in 2024
US Holds Over One-Third of Global Millionaires and Billionaires in 2024

The United States holds more than a third of global millionaires and billionaires, boasting over 6 million liquid millionaires and 867 billionaires. Fueled by robust tech and AI industries, US millionaire populations grew 78% over the past decade. Key wealth centers include New York, the Bay Area, and emerging hubs in the Sunbelt, while immigration contributes to this wealth surge.

U.S. Credit Default Swaps Surge Amid Debt Ceiling Concerns, Panic Likely Overblown
U.S. Credit Default Swaps Surge Amid Debt Ceiling Concerns, Panic Likely Overblown

Investors are increasingly purchasing credit default swaps to insure against potential U.S. government debt default amid unresolved debt ceiling issues. CDS spreads on U.S. government debt have surged to near two-year highs, reflecting political risk rather than genuine default fear. Analysts predict this spike is temporary as Congress works toward a budget deal before July to raise the debt limit. The U.S. government is expected to avoid default as it has in prior crises, though fiscal challenges remain prominent following Moody's recent credit rating downgrade.

South Korea Cuts Interest Rates Amid Sluggish Economy and Trade Tensions
South Korea Cuts Interest Rates Amid Sluggish Economy and Trade Tensions

South Korea's central bank reduced its key interest rate to 2.5% and slashed the 2025 growth forecast to 0.8% to counter economic headwinds. Ongoing US tariff policies and political unrest following former President Yoon’s ousting have weakened domestic demand and trade prospects. Despite market gains, challenges remain as the country navigates global trade disputes and internal political shifts.

Fed Chair Powell Assures Trump of Non-Political Basis for Rate Decisions
Fed Chair Powell Assures Trump of Non-Political Basis for Rate Decisions

Federal Reserve Chair Jerome Powell met with President Donald Trump at the White House, emphasizing that monetary policy decisions will continue to rely on objective economic analysis rather than political influence. The central bank reaffirmed its commitment to address inflation, growth, and employment based on incoming data. Despite Trump's calls for lower rates, the Fed maintains a cautious stance amid tariff uncertainties and expects to hold rates steady for the near term.

Bank of Japan To Slow Government Bond Purchase Cuts Amid Economic Risks
Bank of Japan To Slow Government Bond Purchase Cuts Amid Economic Risks

In response to rising growth risks and sustained inflation above 2%, the Bank of Japan announced it will slow the pace of reducing government bond purchases starting April 2026. The central bank will maintain the benchmark rate at 0.5% while closely monitoring economic signals. As of mid-2025, JGB purchases are expected around 4.1 trillion yen monthly, with reductions tapering to 200 billion yen quarterly in late 2026. The cautious stance aims to balance market stability with inflation control as Japan’s economy experiences historic quarter-on-quarter contraction.

Japan's Core Inflation Hits Highest Since January 2023, Pressuring BOJ on Rate Hikes
Japan's Core Inflation Hits Highest Since January 2023, Pressuring BOJ on Rate Hikes

Japan's core inflation rate climbed to 3.7% in May, the highest level since January 2023, as rice prices surged over 100%. Despite this, the BOJ remains cautious on raising rates amid a slowing economy and a 0.2% GDP contraction. Inflation has stayed above the 2% target for 38 consecutive months, challenging the central bank's monetary policy moving forward.

Turkey’s Erdogan Rejects Interest Rates but Commits to Economic Program
Turkey’s Erdogan Rejects Interest Rates but Commits to Economic Program

Turkish President Erdogan reaffirmed his opposition to interest rates, calling for alternatives to the current interest-based economic system. However, he pledged to continue implementing the economic program led by the finance ministry, which has achieved progress in reducing inflation and stabilizing the economy amid external and internal challenges. The government aims to achieve single-digit inflation while reforming monetary policy.

Trump Accuses China of Violating Tariff Truce Amid Stalled Trade Talks
Trump Accuses China of Violating Tariff Truce Amid Stalled Trade Talks

Former US President Donald Trump accused China of violating a recently negotiated tariff truce, claiming that the initial agreement brought economic stability but China failed to comply. The deal saw both countries reduce tariffs significantly, yet trade talks between the US and China have reportedly stalled. US officials remain hopeful for direct communication to progress the negotiations.

Trump and Xi Expected to Discuss Trade Talks Soon, Says Economic Adviser
Trump and Xi Expected to Discuss Trade Talks Soon, Says Economic Adviser

Kevin Hassett, White House National Economic Council director, indicated that Presidents Trump and Xi Jinping could talk about trade soon, although no specific date has been scheduled. Both sides remain willing to engage, despite recent tensions following allegations of China violating preliminary trade agreements. Senior officials describe negotiations as slow-moving but ongoing, with daily talks between trade teams aiming to progress toward resolution.

Elon Musk Advised by Father to Rest and Visit India Amid Business Focus
Elon Musk Advised by Father to Rest and Visit India Amid Business Focus

Errol Musk urges his son Elon Musk to take breaks despite his energetic work ethic and encourages a visit to India, highlighting the country's booming economy. He also recommends Elon focus on Neuralink's groundbreaking brain-computer interface developments, while expressing optimism for future space research and global economic growth.

Trump and Xi Jinping Expected to Speak Soon Amid Trade Tensions
Trump and Xi Jinping Expected to Speak Soon Amid Trade Tensions

Amid rising trade tensions, U.S. President Donald Trump and China's President Xi Jinping are expected to engage in a direct conversation soon. Despite a recent 90-day tariff reduction agreement, both nations have accused each other of undermining the deal. Market reactions have been cautious as leadership dialogue is viewed as crucial to resolving the ongoing disputes.

Fed Governor Warns Tariffs Could Reverse Inflation Gains and Impact Labor Market
Fed Governor Warns Tariffs Could Reverse Inflation Gains and Impact Labor Market

Federal Reserve Governor Lisa Cook cautions that tariffs implemented under the Trump administration may undermine recent gains in reducing inflation and pose risks to the labor market. Despite inflation hovering near the Fed's target, Cook stressed that trade-related price pressures and persistent inflation expectations complicate further progress. The Federal Reserve is expected to hold interest rates steady in the upcoming June policy meeting amid uncertainty, with officials divided over the magnitude and timing of tariff impacts on future monetary policy adjustments.

Air India Boeing 787 Crashes After Takeoff from Ahmedabad Airport
Air India Boeing 787 Crashes After Takeoff from Ahmedabad Airport

Flight AI 171, an Air India Boeing 787-8 Dreamliner bound for London Gatwick, crashed after departing from Ahmedabad's Terminal 2. With more than 200 passengers onboard, the accident prompted immediate rescue efforts and suspension of flights at the airport. The tragedy has also impacted Boeing’s stock prices. Investigations are underway.

UK Economy Contracts Sharply in April Amid Trade Tariffs and Tax Hikes
UK Economy Contracts Sharply in April Amid Trade Tariffs and Tax Hikes

In April 2025, the UK economy shrank by 0.3%, driven by new US trade tariffs and domestic tax hikes including increased national insurance and the end of a property tax break. Despite strong growth in the first quarter, economists forecast subdued expansion for the remainder of 2025, citing export declines and economic uncertainty.