BofA on India’s August CPI: Inflation back in RBI’s comfort zone, rate cuts unlikely soon

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Bank of America (BofA) has said that India’s retail inflation cooled to 2.1% in August 2025, well within the Reserve Bank of India’s (RBI) comfort zone. The moderation comes after months of volatility, with the fall largely driven by seasonal factors and easing food prices.

According to BofA, while food inflation is now flat on a year-on-year basis, the August reading saw temporary pressure from seasonal food price hikes. Meanwhile, core CPI rose to 4.2% in August, compared to 3.9% in July, largely due to higher gold prices.

The brokerage expects inflation to remain subdued for an extended period, forecasting that CPI will stay below 4% through 2025. This benign trajectory is expected to provide the RBI with comfort, though BofA believes there is limited scope for immediate rate cuts, given the central bank’s focus on maintaining stability.

BofA further noted that the RBI is likely to prioritize growth while keeping a close eye on inflationary risks. It added that the GST cuts effective from September 22 could help keep inflation lower for longer, reinforcing the current softening trend.

The August inflation print marks a sharp reversal from earlier concerns around food-led price spikes and signals a stable policy environment as India enters the second half of FY25.

Aditya Bhagchandani serves as the Senior Editor and Writer at Business Upturn, where he leads coverage across the Business, Finance, Corporate, and Stock Market segments. With a keen eye for detail and a commitment to journalistic integrity, he not only contributes insightful articles but also oversees editorial direction for the reporting team.

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