India’s retail inflation slowed to a five-month low in January as food price inflation eased, boosting the odds of another rate cut in the South Asian economy where growth is slowing amid the escalating threat of a global trade war.

Annual retail inflation (INCPIY=ECI), opens new tab in January was at 4.31%, lower than economists’ estimate of 4.6% and 5.22% in the previous month. Retail inflation was at 3.65% in August 2024.

Cooling inflation boosts chances of further policy easing by India’s central bank, which cut its key policy rate for the first time in nearly five years in February in a bid to boost an economy that is expected to grow at its slowest pace in four years.

The government also announced sweeping income tax cuts in its February 1 budget to lift consumption.

The Reserve Bank of India sees inflation averaging 4.8% in the current financial year that ends on March 31 and expects it to fall to 4.2% next year, it said last week.

“The sharp fall in Indian headline consumer price inflation in January reinforces that the RBI will continue to loosen monetary policy over the coming months to support the economy,” said Harry Chambers, an economist at Capital Economics.