India's headline inflation slowed for a third straight month in April to 4.89 percent, a level seen comfortable for the RBI to persist with monetary easing to revive a flagging economy.
April's reading is the lowest since November 2009 and is well below the 5.50 percent estimated by analysts in a Reuters poll. The wholesale price index, India's main inflation measure, rose an annual 5.96 percent in March.
RAHUL BAJORIA, REGIONAL ECONOMIST, BARCLAYS CAPITAL, SINGAPORE
"With food prices expected to remain stable, manufacturing prices weak due to slow growth and commodity prices stable, inflation in expected to be on a broad downtrend for the next six months and this, we believe, opens up room for more rate cuts.
We think there is a possibility of as much as 75 basis points more rate cuts in the next six months, including 25 basis points in the next policy in June. With CPI (consumer price index) moving at the margin and WPI easing, inflation expectations should start coming off, which should be the key factor for the central bank to consider for its rate stance.
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI
There is across-the-board softness, and we do expect some easing in June or July by the RBI, a 25 basis points rate cut. Earlier, we were looking at June but given the concerns on current account, and the fact that monsoon outlook will get clearer in July, it allowed us to think probably it probably could be June or July when RBI cuts rates. After the 25 bps cut, we expect a longish pause.
SURESH KUMAR RAMANATHAN, HEAD OF REGIONAL INTEREST RATES AND FX STRATEGY, CIMB, KUALA LUMPUR
"Lower than expected inflation, justifies recent RBI easing and the typical reaction in the OIS (overnight indexed swap) market. While broad-based growth slowing is anticipated in Asia, the relative softness in price pressures in India is not surprising.
"While further rate cuts are still evenly balanced, the shift in sentiment in OIS markets will continue. Market is leaning closer towards receiving rather than paying on OIS rates complex."
RADHIKA RAO, ECONOMIST, DBS, SINGAPORE
"Cast against the backdrop of deferred diesel price adjustments, weak aggregate demand and tame food costs, it is not surprising that inflation remains non-threatening. The easing-off in inflation on sequential basis is becoming notable in recent months.
"This release, in isolation, provides sufficient policy leeway, though the over 70 percent jump in April's trade deficit has washed CAD worries to the shore once again.
"In addition, the debate on which inflation metric the RBI must be monitoring also holds water, with CPI inflation flagged as a better representative. To this extent, the authorities might prefer to sit on their hands in June and act in July instead."