India CPI Eases to 4.2% — MUFG Says RBI Likely to Keep Rates on Hold
India’s Consumer Price Index (CPI) moderated to 4.2% year-on-year in March 2025, marking the third consecutive month within the Reserve Bank of India’s 2–6% target band. MUFG’s analysis highlights broad-based disinflation: food inflation fell to 5.8%, core inflation (ex‑food and fuel) dropped to 3.4% — its lowest since September 2020 — and urban/rural CPI narrowed to 4.0% and 4.4% respectively. MUFG projects average CPI of 4.5% for FY2025‑26 and expects the RBI to maintain the repo rate at 6.50% through at least September 2025, citing anchored inflation expectations, improved supply conditions, and normalizing global commodity prices. Key upside risks include an adverse monsoon and commodity price spikes; MUFG models these as potential triggers for 60–100 bps additional inflation. Comparative analysis shows India outperforming many emerging markets on inflation metrics. For traders, the report implies policy rate stability supporting steady credit conditions, moderate bond yields, and limited near-term volatility in INR — though commodity shocks or fiscal slippage could prompt rapid repricing.
Neutral
Softer CPI and falling core inflation increase the likelihood the RBI will keep the policy rate on hold, which is typically neutral for crypto markets. Rate stability reduces the chance of sudden liquidity shocks and supports steady credit conditions and moderate bond yields — factors that generally limit extreme volatility in risk assets including cryptocurrencies. Short-term effects: subdued inflation lowers the probability of hawkish surprises, which can reduce downward pressure on risk assets; crypto traders may see muted volatility and range-bound price action unless an external shock occurs. Long-term effects: sustained disinflation and policy predictability can encourage stable investor risk appetite, supporting gradual capital inflows to emerging market assets and crypto. Key caveats: commodity price spikes, an adverse monsoon, or fiscal slippage could rapidly reverse expectations, triggering currency weakness, higher local yields, and risk-off flows that would be bearish for crypto. Historical parallels: periods when central banks signaled extended pauses (e.g., post-tightening windows in other EMs) have produced neutral-to-mildly-positive conditions for crypto, until exogenous shocks forced repricing. Overall, the balance of factors points to a neutral impact unless one of the identified risks materializes.