Global Brokerages Anticipate More RBI Rate Cuts This Fiscal Year
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Synopsis
Global brokerages are predicting further rate cuts by the RBI this fiscal year following the central bank's recent reduction of the repo rate to 6%. Analysts expect at least one more cut amid economic uncertainties and declining inflation.
Key Takeaways
- The RBI has cut the repo rate to 6%.
- Global brokerages anticipate additional rate cuts.
- Inflation remains under control despite economic pressures.
- GDP forecast for FY26 has been downgraded.
- A proactive approach to liquidity management is expected.
New Delhi, April 9 (NationPress) The Reserve Bank of India's (RBI) recent move to reduce the repo rate by 25 basis points to 6 percent and transition its stance from ‘neutral’ to ‘accommodative’ has heightened expectations among global brokerages for additional monetary easing in the near future.
In light of escalating global uncertainties, increasing tariff conflicts, and indications of a slowdown in economic growth, analysts from Morgan Stanley and Crisil have predicted one or two more rate reductions within this fiscal year.
Morgan Stanley anticipates an additional 25bps cut during the June policy meeting, with a potential for a more extensive easing cycle of 50 to 75 bps if economic growth remains sluggish.
The RBI has revised its GDP forecast for FY26 downwards to 6.5 percent, from a previous estimate of 6.7 percent, citing risks stemming from global tariff increases and weak investor sentiment.
Inflation, on the other hand, is being kept in check. Declining food prices have resulted in headline inflation dropping below the central bank's target of 4 percent, prompting the RBI to adjust its CPI inflation projection to 4 percent for FY26.
Consequently, Morgan Stanley believes the RBI will be proactive in managing liquidity and reversing regulatory tightening to facilitate effective policy implementation.
Crisil shared a similar perspective, deeming the rate cut a ‘foregone conclusion’ due to diminished inflationary pressures and growing risks to economic growth.
“The RBI’s policy adjustment indicates the onset of a more sustained rate reduction cycle,” stated Dharmakirti Joshi, Chief Economist at Crisil, adding that at least two additional rate cuts of 25bps each are likely within this fiscal year.
Joshi further pointed out that while a typical monsoon forecast is favorable for food inflation, escalating climate disturbances such as heat waves require close observation.
“On a global scale, aggressive US tariff hikes and corresponding actions by other countries have established downside risks to global growth as the baseline scenario,” Joshi mentioned.
