New Delhi, Oct 2 (NationPress) Inflation is becoming less of a concern this fiscal year, as GST rate reductions and falling crude oil prices are expected to stabilize prices, according to a report from Crisil. This report indicates that the initiation of rate cuts by the US Federal Reserve has created additional room for the RBI to implement rate reductions.

In September, the Fed announced a 25 basis points rate cut. S&P Global anticipates two additional cuts of 25 basis points each for the remainder of calendar year 2025 and states, “We foresee one more rate cut from the RBI during this fiscal year,” as mentioned in the report.

The GST cuts are likely to provide a temporary relief to inflation, depending on the timing of how producers transfer these reductions to consumer prices. The GST rates have been lowered for a broad array of food and non-food products, which is likely to contribute to a widespread reduction in inflation.

However, food inflation may still face challenges due to excessive rainfall in key kharif crop-producing states, and the overall impact remains uncertain. Nevertheless, high reservoir levels are promising for rabi crop production.

In general, the RBI's Monetary Policy Committee (MPC) forecasts the Consumer Price Index (CPI) inflation at 2.6 percent for this fiscal year, a decrease from the 3.1 percent projected in August.

Decreasing crude oil prices will further help keep inflation under control, with expectations that Brent crude will average between $62 and $67 per barrel this fiscal year, a notable decline from the average of $78.8 per barrel in fiscal year 2025, as noted in the report.

The MPC’s recent announcement was not in line with our expectations for a rate cut this time. While the MPC appears content with current growth, it may be reserving its monetary policy flexibility to respond when potential risks to growth materialize. Favorable inflation forecasts maintain the possibility for further easing of monetary policy,” the report emphasized.

While cuts in GST will enhance household purchasing power, the actual effect will depend on the timing of when producers convey these tax reductions to consumers.

“Overall, we anticipate that the influence of GST rate cuts on consumption will manifest throughout this fiscal year and into the next,” the report concluded.