Synopsis
A report indicates that the Reserve Bank of India may initiate a shallow rate cut cycle of 25-50 bps to stimulate growth, alongside potential liquidity easing measures. The MPC minutes reflect a consensus on the necessity of easing rates amidst improving inflation, supporting a favorable economic outlook.Key Takeaways
- RBI likely to cut rates by 25-50 bps.
- Focus on boosting economic growth.
- Improving inflation outlook allows for rate cuts.
- Consensus among MPC members on easing rates.
- GDP growth projected at 6.4% this fiscal year.
New Delhi, Feb 24 (NationPress) A shallow rate cut cycle of 25-50 bps is anticipated from the Reserve Bank of India (RBI), with additional liquidity easing measures possibly on the horizon to stimulate economic growth, according to a report released on Monday.
The RBI is expected to lower the repo rate by 25-50 basis points, bringing it down to 5.7 percent in the near future.
The initiation of this rate cut cycle in February during the central bank’s Monetary Policy Meeting (MPC) was in line with expectations, and the MPC minutes reveal a general consensus among members on key issues, as detailed in a report from Emkay Global Financial Services.
The minutes from the February meeting indicated a shared perspective among all members, emphasizing the necessity for easing rates to foster growth, supported by an improving inflation outlook.
"Looking ahead, we foresee a shallow rate cut cycle (an additional 25-50 bps), together with the potential for relaxation of regulatory measures," the report stated.
All MPC members, both internal and external, noted that the declining inflation trend observed in recent months, along with a favorable outlook, gives the MPC the flexibility to implement a rate cut aimed at supporting growth.
A report from Kotak Research suggests that another 25-50 bps rate reductions are likely in FY26, considering the RBI’s growing acceptance of the Indian rupee's depreciation and the inflation trajectory moving towards the 4 percent target without any significant supply shocks.
According to RBI Governor Sanjay Malhotra, strong policy frameworks and solid macro fundamentals are essential for resilience and overall economic stability.
There is also a domestic need to sustain high growth momentum while ensuring price stability, which requires the monetary policy to leverage various instruments to balance inflation and growth, he highlighted during the MPC meeting.
The projected real GDP growth for the current fiscal year stands at 6.4 percent, a moderate increase after a robust 8.2 percent growth last year. Although GDP growth is expected to rebound in the latter half of 2024-25 and 2025-26, estimates for growth rates in 2025-26 range from 6.3 to 6.8 percent.
