Inflation Set to Stabilize as Food Prices Ease and Agricultural Output Rises by 2025

Inflation in the country is projected to stabilize between 4.3% and 4.7% in FY26, driven by moderating food prices and improved agricultural output. PL Capital forecasts monetary policy easing with rate cuts, aiding economic stability. The report notes the potential impact of reduced import duties on mitigating inflationary pressures.

A recent report by PL Capital forecasts inflation in the country to stabilize at an average of 4.3% to 4.7% in the financial year 2025-26 (FY26). As food prices moderate and agricultural output stabilizes, inflationary pressures are expected to ease.

The report highlights that food inflation, a major contributor to price hikes in 2024, has peaked. Improved agricultural yields, particularly from the rabi crop, could stabilize food prices in 2025. With the central government's target of maintaining inflation between 2% and 6%, the average target is set at 4%.

Furthermore, monetary policy adjustments are anticipated, including a notable 25-basis point repo rate cut in FY25, followed by a 50-basis point reduction in early FY26. Reduced import duties on key products could further mitigate inflationary pressures, ensuring economic stability within target ranges.

(With inputs from agencies.)