Synopsis
As the RBI conducts its MPC meeting from April 7-9, SBI Research forecasts a 25 bps rate cut. Cumulatively, a reduction of at least 100 bps is expected across the cycle, with two prior cuts in February and April. Insights into the RBI's stance and economic outlook will be revealed on April 9.Key Takeaways
- RBI's MPC meeting started on April 7.
- Anticipated 25 bps rate cut by SBI Research.
- Expected cumulative rate cuts of at least 100 bps.
- Subsequent cuts could commence in August.
- CPI inflation projected to fall to 3.8% in Q4 FY25.
Mumbai, April 7 (NationPress) As the Reserve Bank of India (RBI) initiates its Monetary Policy Committee (MPC) meeting from April 7 to April 9, a report from SBI Research indicates an expected 25-basis point reduction in the policy rate. The total rate cut over this cycle could be a minimum of 100 basis points, with two consecutive cuts occurring in February and April.
According to the SBI report, following a pause in June, the subsequent rate cuts may begin in August.
“Between February 2025 and March 2026, we project a total reduction of at least 100 bps in the repo rate (with a 25 bps cut already implemented in February 2025 and an additional 75 bps in the remaining fiscal year), which will be directly reflected in the EBLR and 60 bps in MCLR,” the report elaborated.
Furthermore, the report highlighted that the neutral nominal policy rate is estimated to be around 5.65 percent based on current natural rate assessments.
“Considering the anticipated average inflation and the output gap resulting from various GDP forecasts, a cumulative policy rate reduction of 75-100 bps is anticipated moving forward,” it added.
The announcement of the RBI MPC's decision is set for April 9, which will shed light on the Reserve Bank's policy direction and India's economic forecast.
The CPI inflation is projected to decrease to 3.8 percent in Q4 FY25, averaging 4.6 percent for FY25.
For FY26, average CPI inflation could be in the range of 3.9-4.0 percent, while core inflation is expected to hover around 4.2-4.3 percent.
“Until September or October, the headline inflation is expected to decline but could rise thereafter. The United States has imposed reciprocal tariffs on multiple economies, exceeding those on India, which may heighten concerns about dumping into India from these countries, thus resulting in lower inflation,” stated the report.
Moreover, the report noted that durable liquidity is projected to remain in surplus during FY26, bolstered by several elements such as OMO purchases, the RBI’s dividend transfers, and a balance of payments surplus estimated at around USD 25-30 billion in FY26.
