New Delhi, April 16 : The RBI has already embarked on a rate cutting cycle, and a report by HSBC Global Research said on Wednesday that it expects a 25bp rate cut in each of the June and August policy meetings, taking the repo rate down to 5.5 per cent this fiscal (FY26).

Furthermore, it also expects easy liquidity conditions to persist and help in the transmission of rate cuts.

The CPI inflation in March came in at 3.3 per cent, lower than the market expectation of 3.5 per cent.

Food prices remained in deflation for the third month, down 0.7 per cent on-month, led by falling vegetable, pulses and egg, fish and meat prices.

The sequential momentum in cereal and milk prices was benign, while that of sugar and fruits was high.

'The April inflation print is trending close to March levels. Vegetable prices in the first 10 days of April have eased by 0 to 5 per cent (on-month) on the back of a sharp fall in onion and tomato prices,' said the HSBC report.

It forecasts CPI headline inflation to average 3.7 per cent in FY26, well below RBI target and forecast (of 4 per cent).

Food inflation is likely to fall further from April onwards when the new wheat crop hits the market.

'Furthermore, the IMD has issued a 'normal' monsoon forecast for 2025. Core inflation, too, will likely remain soft, led by the recent appreciation of the rupee, imported disinflation from China, softer oil prices, and weaker domestic growth,' said the report.

At the wholesale level too, March prices remained benign, with WPI inflation easing at a faster clip than CPI inflation for core categories.

The February Index of Industrial Production (IIP) grew 2.9 per cent (on-year), lower than market expectation of 3.6 per cent.

'Our framework of 100 indicators of growth shows that the March quarter looks better than previous two quarters but remains well below June 2024 (66 per cent indicators are in the positive vs 62 per cent in the December quarter),' the report mentioned.

/IANS