India’s retail inflation dropped sharply to 3.61% in February 2025, falling below the 4% mark for the first time in six months, driven by lower vegetable prices. The RBI may have room for a potential policy rate cut as inflation is expected to remain below target.

India's retail inflation fell below 4% in February for the first time in six months mainly due to a decline in vegetable prices, giving the central bank room to cut rates further in coming meetings. Annual retail inflation in February eased to 3.

CPI is now well within RBIs main inflation target of 4%, warranting a possibility of yet another 25 bps rate cut from the central bank in the upcoming April 2025 policy. If that were the case, a repo rate cut would lead to further revision in home loan EMIs and fixed deposit rates by banks.