Synopsis
A report indicates that a shallow rate cut cycle of 25-50 bps by the RBI is expected to stimulate growth, along with possible liquidity easing measures. This aligns with members' consensus during the recent MPC meeting, highlighting the need for rate cuts amid a favorable inflation outlook.Key Takeaways
- RBI likely to cut repo rate by 25-50 bps
- Inflation outlook improving provides room for cuts
- Consensus among MPC members on easing rates
- GDP growth projected at 6.4% this year
- Further measures may be taken to support growth
New Delhi, Feb 24 (NationPress) A shallow rate cut cycle ranging from 25 to 50 basis points by the Reserve Bank of India (RBI) is anticipated, alongside potential further measures to ease liquidity, in order to stimulate growth, according to a report released on Monday.
The RBI is expected to lower the repo rate by 25 to 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 Monetary Policy Meeting (MPC) was in line with expectations, and the minutes from the MPC reveal a strong consensus among members on critical issues, as stated in the report by Emkay Global Financial Services.
The minutes from February's meeting indicated that all members acknowledged the necessity for rate reductions to foster growth, aided by an improving inflation outlook that allows for such measures.
“Looking ahead, we foresee a shallow rate cut cycle (an additional 25-50 bps), along with the potential for easing regulatory measures,” the report noted.
All MPC members, both internal and external, emphasized that the declining inflation trend over recent months, along with a favorable outlook, grants the MPC the flexibility to implement a rate cut to support growth.
A report from Kotak Research indicates that another 25-50 bps cut is anticipated in FY26, considering the RBI’s greater tolerance for a weaker Indian rupee, as well as the inflation trajectory approaching the 4 percent target without significant supply disruptions.
RBI Governor Sanjay Malhotra stated that robust policy frameworks and strong macro fundamentals are vital for resilience and overall macroeconomic stability.
There is also a pressing need to sustain high growth momentum domestically while ensuring price stability, which requires the monetary policy to leverage various instruments to maintain a balance between inflation and growth, he stressed during the MPC meeting.
The real GDP growth for the ongoing year is projected at 6.4 percent, a deceleration from last year's robust 8.2 percent growth. Although GDP growth is expected to rebound in the latter half of 2024-25 and 2025-26, estimates for 2025-26 range between 6.3 percent and 6.8 percent.
