India's Cooling Inflation Prompts Rate Cut Calls, Raises Concerns Over Weakening Domestic Demand

A slump in India's retail inflation to six-year lows and a likely drop to a record low in July is prompting calls for at least one more interest rate cut this year, with many analysts saying the sharp disinflation is also a sign of weakening demand.

The drop in June headline inflation is accompanied by low core inflation, which, excluding gold, silver and fuel prices, remains below 4%, suggesting softer underlying consumption which may need more support from monetary policy, analysts say.

The Reserve Bank of India cut interest rates by a deeper-than-expected 50 basis points (bps) at its last policy review in June but changed its stance to 'neutral', signalling limited room to cut rates further...

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