February headline inflation in India held steady at 5.1% YoY. Encouragingly, core inflation, which excludes food and energy, moderated further to 3.3% YoY. Headline inflation may tick up in the coming months due to higher food prices from the warm weather and seasonal factors. However, it is still expected to remain within RBI’s 2-6% target range.

On the growth front, there were few signs of a slowdown in domestic demand. Production of consumer durables expanded by nearly 11% YoY in January. Overall, it appears the economy remains in a sweet spot. 

The near-term outlook remains positive while underlying inflation remains well anchored. This should see RBI keep rates on hold at 6.50% for the foreseeable future. They do not need to act ahead of the Fed’s next move.