Will monetary policy shift to easing? India's September CPI year-on-year growth rate hits a new low for the year at 1.54%

India's inflation level has once again fallen below the central bank's target range, enhancing market expectations for the Reserve Bank of India to cut interest rates to support the economy, which is facing pressure from high tariffs imposed by the United States.

Data released by the Indian Ministry of Statistics on Monday showed that India's CPI in September rose by 1.54% year-on-year. This figure is slightly higher than the economists' forecast of 1.50%, but far below the 2.07% increase in August.

This data marks the slowest growth rate in eight years and is the second time this year that it has fallen below the Reserve Bank of India's target range of 2%-6%. In August, inflation had accelerated for the first time in ten months.

The significant slowdown in inflation data is primarily driven by two factors. First, this year's above-normal monsoon rains have boosted agricultural output, which in turn helped lower food prices. Second, the consumption tax reform implemented by the Modi government on September 22 has reduced the prices of daily necessities.

The weak inflation data provides more reasons for the Reserve Bank of India (RBI) to cut interest rates at the December monetary policy meeting. Data shows that the Indian economy expanded by 7.8% in the three months ending in June, marking the fastest growth rate in over a year.

However, analysts generally expect that U.S. tariffs on India will put pressure on the country's annual economic growth. According to CCTV News, Trump raised tariffs on Indian goods to 50% to punish India for purchasing Russian oil. This tax rate is the highest in the Asia-Pacific region, causing Indian goods to lose price advantages compared to manufacturing competitors like Vietnam and Bangladesh