Investing.com – Data released this week showed headline consumer price inflation in India falling from 5.5% year-on-year in November to 5.2% in December.

According to Capital Economics, this confirms their prediction that the Reserve Bank of India (NS:) (RBI) will begin its monetary easing cycle at the next Monetary Policy Committee (MPC) meeting on February 7, despite the recent depreciation of the Indian rupee.

A decline in food inflation to 7.7% in December from 8.2% in November, coupled with confined price pressure from the economic slowdown, are seen as key factors influencing a potential RBI decision.

The central bank, currently led by Governor Sanjay Malhotra, is expected to cut interest rates, fending off concerns among some analysts that the weakening rupee could make the move more challenging due to fears of imported inflation.

Capital Economics argues that the RBI’s management of the pace of rupee depreciation suggests a change in priorities rather than concern for imported inflation.

Despite the decline in foreign exchange reserves, they remain at a level historically considered high. Allowing the RBI to depreciate the rupee faster is seen as a strategic move to make Indian companies more competitive globally, especially amid signs of a weakening domestic economy.

As India prepares for potential changes to its monetary policy, the world’s attention will soon turn to the United States, where Donald Trump is set to inaugurate his second term as president.

The event is scheduled for next week, and a special online briefing will be held on January 21 to discuss expectations for Trump’s second term.

The impact of Trump’s proposed tariffs, particularly on China, and their potential impact on global supply chains and trade in India remains a significant point of concern for both economists and policymakers.

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