- Banking
- Wealth
- Privileges
- NRI Banking
- Treasures Private Client
Related Insights
January inflation slowed to 4.3% yoy from 5.2% in December, edging closer to the mid-point of the target range. Sequential moderation was largely driven by a correction in vegetable prices reflecting winter disinflation as well as lower protein sources. Food (& beverages) slowed to 5.7% yoy vs 7.7% in Dec24.Vegetables inflation declined ~16% MoM, accompanied by a 2% drop in pulses and products as well as lower egg plus spices etc. Cereals were marginally higher on MoM terms. While the bigger swing factor for the headline was food, non-food momentum was also subdued. The core reading (ex-food and fuel) inched up marginally to 3.66% yoy vs 3.58% month before, partly driven by gold. Softening inflation prints back the central bank MPC’s move to lower rates earlier in the month, with headline prints expected to head to the midpoint of the target over the next two months. Indicating softer growth momentum, IP growth moderated to 3.2% yoy in December from 5% month before, on weaker consumer goods output, despite signs of a pickup in infra & construction goods.
Monetary policy would remain focused on the domestic growth-inflation trade-off at this juncture, whilst addressing rupee depreciation risks via intervention efforts. We expect another 25bp rate cut at the April meeting and a total of 75bp in this cycle. Looking ahead, while headline eases, core inflation is likely to head towards 4% into early FY26. We expect FY25 inflation to average 4.8% yoy, before easing to 4.1% next year, assuming normal monsoons and low global energy prices.
Liquidity measures will need to be adequate to enable better transmission. Deficit in the banking system stood at an average ~INR 1.8trn this week. The RBI will conduct a 49-day VRR auction worth INR750bn on Friday. In addition, an overnight repo auction worth INR 2.75trn is in the pipeline for Thursday, largest such quantum since daily auctions were introduced a month back. On Feb 11, to compensate for a drain on durable liquidity due to heavy FX intervention, the central bank had doubled the size of its bond purchases to INR400bn via open market operations, compared to earlier notified INR200bn (we had covered other measures here and here). Rupee movements have been choppy, with currency reversing out earlier gains to settle weaker near 86.90 yesterday.
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.