Rising Gold Prices and Global Tariff Frictions Threaten to Reverse CPI Gains: UBI Report
The Union Bank of India (UBI) has warned that despite recent improvements in retail inflation, the coming months could witness an upward trend in the Consumer Price Index (CPI) due to escalating global tariff tensions and rising gold prices. The report noted that even if food inflation remains subdued, the non-food component—especially precious metals—will exert significant upward pressure on headline inflation. In particular, gold, which holds cultural and investment significance in India, has been climbing steadily amid global geopolitical uncertainties and trade frictions, raising the cost of living despite otherwise benign price trends in other categories.
Highlights:
UBI warns CPI may rise despite stable food prices
Gold prices and global tariff wars seen as primary inflation drivers
Non-food components, particularly precious metals, now crucial in CPI trends
April CPI Drops to 3.16%, Lowest Since 2019, Led by Falling Food Prices
India’s retail inflation in April dropped sharply to 3.16%, a six-year low, from 3.34% in March, according to data released by the Ministry of Statistics and Programme Implementation. The fall was largely driven by a broad-based decline in food categories including vegetables, fruits, pulses, cereals, and meat. Personal care and effects also registered price corrections. The April inflation rate marked an 18 basis point month-on-month drop and highlighted the ongoing disinflationary trend that began in late 2024.
Highlights:
April CPI at 3.16%, down from 3.34% in March
Lowest inflation print since 2019
Major contributors to disinflation: vegetables, fruits, pulses, cereals, and personal care
Core Inflation Remains Stable; Gold Prices Distort Long-Term Trend
Core inflation, which strips out volatile food and fuel prices, remained largely unchanged at 4.09% in April. When gold is excluded, core CPI stayed flat at 3.3%. However, a notable shift occurred in core CPI excluding transportation, which declined slightly to 4.18% after a sharp spike to 4.26% in March. Personal care inflation also saw marginal easing from 13.50% in March to 12.90% in April. The persistence of core inflation, especially with gold as a key contributor, has raised concern about inflationary stickiness in the broader economy.
Highlights:
Core inflation steady at 4.09%; ex-gold at 3.3%
Core CPI ex-transport eases from March’s spike
Personal care inflation drops from 13.50% to 12.90%
UBI Forecasts 50 bps Repo Rate Cut Between June and August
The UBI report reaffirmed its forecast for a cumulative 50 basis points cut in the Reserve Bank of India’s (RBI) repo rate, expected to be implemented between June and August 2025. The forecast is grounded in CPI trends that continue to remain well below the RBI’s upper tolerance limit of 6%, with the bank projecting full-year FY25 inflation at around 3.7%. The recent April print of 3.16% further strengthens the case for monetary easing, especially in the context of global slowdown concerns and limited domestic price pressures.
Highlights:
UBI projects 50 bps repo rate cut between June–August
FY25 CPI expected at 3.7%, within RBI’s 2–6% target range
April’s CPI of 3.16% reinforces monetary policy easing outlook
RBI Maintains Inflation Within Target Band Since October 2024 Breach
Retail inflation in India last exceeded the RBI’s 6% upper tolerance limit in October 2024 but has remained within the mandated 2–6% range ever since. Policymakers have aimed to anchor inflation closer to the 4% midpoint target. While food inflation had previously triggered price instability, easing prices since early 2025 have allowed greater headroom for the RBI to consider further policy accommodation. In its April monetary policy review, the RBI stated that inflation for FY26 is expected to remain under control, reinforcing investor confidence in macroeconomic stability.
Highlights:
Inflation has stayed within 2–6% RBI band since October 2024
RBI expects inflation to remain benign through FY26
Food inflation under control has aided policy stability
Global Inflation Woes Persist, But India Outperforms Peers
While several advanced economies continue to grapple with elevated inflation levels, India has largely managed to maintain macroeconomic discipline. The RBI kept the repo rate steady at 6.5% for 11 consecutive policy meetings before delivering its first rate cut in February 2025—its first in nearly five years. Analysts credit the RBI’s proactive stance and coordinated fiscal-monetary efforts for steering the inflation trajectory smoothly, especially amid global disruptions like trade wars, commodity volatility, and supply chain realignments.
Highlights:
India outperforms peers in inflation control
RBI cut repo rate in Feb 2025 after 11 meetings at 6.5%
Policy coordination praised amid global inflation turbulence
