Inflation

Global equity markets are entering a decisive phase as investors weigh persistent inflationary pressures, mixed corporate earnings and shifting international economic dynamics. Central bank policy trajectories, commodity price movements and geopolitical developments continue to influence risk appetite. While moderating inflation has offered periodic relief, uneven earnings growth across sectors underscores structural adjustments underway in the global economy.

Pakistan’s central bank kept its benchmark interest rate unchanged at 10.5 percent, signaling a cautious pause as policymakers weigh easing inflation against fragile economic growth. The decision reflects a balancing act between stabilizing prices, supporting the currency, and maintaining investor confidence amid external financing pressures. While inflation has moderated from previous highs, authorities remain wary of volatility in food and energy costs, as well as global commodity fluctuations.

The Reserve Bank of India (RBI) has revised its inflation forecast for FY26, projecting a moderated rate of 2% as price pressures ease across the economy. This updated outlook reflects improved food supply conditions, a stable crude oil market, and strengthened monetary policy transmission. The downward revision signals optimism about sustained macroeconomic stability, supported by disciplined fiscal management and resilient domestic demand.

India witnessed a marginal decline in retail inflation for both agricultural and rural laborers in September, offering respite to low-income households grappling with persistent price pressures. According to the latest data from the Labour Bureau, inflation measured by the Consumer Price Index for Agricultural Labourers (CPI-AL) and Rural Labourers (CPI-RL) eased slightly as food prices moderated across several key categories. The decline, though modest, reflects improving supply conditions and effective government interventions in essential commodities.

Reserve Bank of India (RBI) Governor Sanjay Malhotra has indicated that there is policy space for potential interest rate reductions, contingent on economic conditions. While the repo rate remains steady at 5.50%, falling retail inflation—recording 1.54% in September 2025—and a downward revision of the FY26 inflation forecast to 2.6% provide scope for future easing. Governor Malhotra emphasized a cautious, data-driven approach, noting that while conditions are favorable, immediate rate cuts are not yet warranted.

India’s Wholesale Price Index (WPI) inflation moved into positive territory in August, registering 0.52% after several months of deflationary trends. The reversal reflects rising costs of food, fuel, and manufactured products, suggesting that wholesale prices are gaining momentum amid persistent global and domestic challenges. While retail inflation remains elevated, the uptick in WPI signals potential downstream effects on consumer prices in the coming months.

Retail inflation in India recorded a moderate rise to 2.07% in August, reflecting a gradual uptick in consumer prices across food and non-food segments. While inflation remains well below the Reserve Bank of India’s upper tolerance limit, analysts note emerging price pressures in key categories such as vegetables, pulses, and fuel. Core inflation, which excludes volatile items like food and fuel, remained relatively stable, indicating underlying price dynamics are contained.