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BUSINESS & TRADE FEBRUARY 13, 2026 | The Indian Eye 34

Global Disinflation and Domestic

Caution Shape Rate Outlook in

US and India: SBI

Weak US demand strengthens the case for Fed cuts, while RBI is expected to stay put amid

volatility and global uncertainty

OUR BUREAU the US Federal Reserve, the report
said.
New Delhi
In contrast, SBI’s assessment of
isinflationary forces in the India’s monetary outlook points to
United States are like- continuity rather than change. The
Dly to persist through 2026, report said the Reserve Bank of In-
strengthening the case for interest dia’s Monetary Policy Committee
rate cuts by the US Federal Reserve, (MPC) is likely to maintain a status
even as India’s central bank is expect- quo on the repo rate in its policy an-
ed to maintain a cautious pause on nouncement scheduled for Friday,
policy rates amid currency volatility citing persistent global uncertainty,
and global uncertainty, according to pressure on government bond yields
two assessments by the State Bank of and volatility in the rupee.
India (SBI). Since the last policy meeting, a
In its report on the US economy, major positive development has been
SBI said a combination of weakening the finalization of the India-EU and
labor market conditions, stagnant A major positive development has been the finalization of the India-EU and India-US trade India-US trade deals, which sharply
household incomes, fragile monetary reduced tariffs on Indian goods from
trends and slowing economic activity deals (ANI file photo) 50 per cent to 18 per cent. The re-
is expected to keep inflation pres- port said India now enjoys one of the
sures subdued in the coming year. from USD 17,890 in January 2025 to peak and stood at 76.26 per cent in lowest tariff regimes among Asian
The report outlined seven key factors USD 18,040 in December 2025. Such December 2025. Lower utilization economies, a move expected to boost
that could push the Federal Reserve limited growth suggests that US con- levels point to weaker industrial ac- export competitiveness and improve
towards easing monetary policy. sumers are entering 2026 with con- tivity and reduced pricing power for trade prospects.
At the heart of the disinflation strained purchasing power, which producers, reinforcing the disinfla- However, the global outlook
narrative is a gradual but sustained could dampen consumption demand tionary trend. remains fragile. SBI pointed to the
softening of the US labor market. and reduce inflationary momentum. The report also examined the Geo-Economics Stress Index, which
The unemployment rate has risen Monetary conditions also re- role of tariffs, noting that while they suggests that heightened uncertain-
steadily from an average of 3.6 per main fragile. The report noted that are often viewed as inflationary, Fed- ty typically translates into econom-
cent in 2023 to 4 per cent in 2024, year-on-year growth in commercial eral Reserve research suggests higher ic stress with a lag of three to four
before climbing further to 4.4 per and industrial loans has stayed in tariffs can suppress economic activi- months, indicating downside risks in
cent by December 2025. This trend negative territory throughout 2025. ty and increase unemployment, ulti- the near term.
suggests that labor market tightness, Persistent contraction in loan growth mately exerting downward pressure Commodity prices add anoth-
which had previously supported reflects subdued business investment on prices. However, it cautioned that er layer of complexity. Metal prices
wage growth and consumption, is and tighter credit conditions, both of tariff hikes can also heighten uncer- have rebounded after a sharp sell-off
easing. which act as brakes on economic ex- tainty, weaken business confidence last week, complicating the inflation
The report also highlighted that pansion and price pressures. and trigger asset price corrections. and growth outlook for policymakers.
the ratio of part-time to full-time On the fiscal front, the with- Finally, SBI highlighted the On inflation, SBI said revised
household employment has re- drawal of stimulus is another dis- growing disinflationary impact of ar- CPI weights could lead to a margin-
mained broadly unchanged between inflationary factor. The US federal tificial intelligence. As firms increas- al increase of 20–30 basis points in
December 2024 and December 2025. budget deficit has narrowed signifi- ingly substitute labor with AI-driven headline inflation, though months
This stagnation indicates a slowdown cantly, from USD 2.7 trillion in 2021 processes, productivity gains could with higher food inflation may see
in full-time job creation, reinforcing to USD 1.7 trillion in 2025. While lower costs and prices. At the same the new index print slightly lower.
signs of cooling labor demand and this signals fiscal consolidation, it time, the shift may suppress wage Amid these mixed signals, SBI
weakening bargaining power for also implies reduced government growth, potentially weighing on over- concluded that the RBI is likely to
workers. spending support for the economy, all economic growth. retain a cautious stance and keep
Adding to this pressure is the potentially curbing demand further. Taken together, these factors policy rates unchanged.
stagnation in real disposable person- Industrial indicators tell a similar suggest that disinflation is likely to The MPC meeting, underway
al income. According to SBI, real dis- story. Capacity utilization in the US persist into 2026, strengthening the from February 4 to 6, will announce
posable income rose only marginally has declined steadily from its 2022 argument for eventual rate cuts by its decision on Friday.

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