Monetary policy may shift towards easing? India's CPI year-on-year growth in September hits a new low for the year at 1.54%.

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India's inflation level has once again fallen below the central bank's target range, boosting market expectations that the Reserve Bank of India will cut interest rates to support the economy, which is facing pressure from high U.S. tariffs.

Data released by India's Statistics Department on Monday showed India's CPI in September rose by 1.54% year-on-year. This figure is slightly higher than economists' forecast of 1.50%, but far lower than the 2.07% increase in August.

This data marks the slowest growth in eight years, and is the second time this year it has fallen below the Reserve Bank of India's 2%-6% target range. In August, inflation had accelerated for the first time in ten months.

The significant slowdown in inflation this time was mainly driven by two factors. First, above-normal monsoon rainfall this year boosted agricultural output, which helped drive down food prices. Second, the consumer tax reform implemented by the Modi government on September 22 reduced the price of daily necessities.

The weak inflation data gives the Reserve Bank of India (RBI) more reason to cut interest rates at its December policy meeting. Data shows that in the three months ending in June, the Indian economy expanded by 7.8%, marking its fastest growth in more than a year.

However, analysts generally expect that U.S. tariffs on India will put pressure on the country's annual economic growth. According to CCTV News, Trump raised tariffs on Indian goods to 50% as punishment for India purchasing Russian oil. This rate is the highest in the Asian region, causing Indian goods to lose their price advantage compared to manufacturing competitors like Vietnam and Bangladesh.

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