New Delhi, Oct 30 (NationPress) The decision by the US Federal Reserve to lower interest rates by 25 basis points has clearly indicated that the Reserve Bank of India (RBI) might consider a similar move in its forthcoming Monetary Policy Committee (MPC) meeting scheduled for early December, as per market analysts on Thursday.

Experts opine that the Fed’s adjustment, which reduces the benchmark rate to a range of 3.75–4.00 percent, bolsters the argument for the RBI to undertake a comparable action aimed at fostering growth and ensuring effective transmission of previous rate cuts.

This rate reduction, marking the second occurrence this year, arrives in the wake of a US government shutdown that has obscured the economic forecast by interrupting essential data releases.

The shutdown has compelled agencies like the Bureau of Labour Statistics to suspend the release of vital metrics such as employment and inflation data, leaving policymakers with a narrowed view of the economy’s status.

Federal Reserve Chair Jerome Powell remarked that the choice was made amid “considerable uncertainty,” but stressed that another cut in December is “not guaranteed.”

In response, Vishal Goenka, Co-Founder of IndiaBonds.com, stated that this development effectively provides the RBI with a green light to reduce its policy rate in the upcoming MPC meeting.

“The US Fed reduced benchmark overnight rates by 25bps as anticipated. Nonetheless, Governor Powell very explicitly pointed out that further cuts in the December meeting are not assured. This is a clear signal for the RBI to cut the repo rate in its next meeting in early December,” Goenka stated.

He further mentioned that the RBI’s last policy decision was a “dovish pause” and that the timing is now appropriate for another cut to facilitate proper transmission throughout the banking sector.

“For effective transmission of previous rate cuts to materialize, a flatter and lower long-end yield curve is essential. With the US cutting rates, we foresee the RBI moving in the same direction, and long-end government bonds appearing appealing,” he noted.

Concurrently, the Fed’s policy change also impacted global commodities. Manav Modi, Analyst – Precious Metals at Motilal Oswal Financial Services Ltd, remarked that gold prices declined after a brief recovery earlier this week as the dollar index and US bond yields increased following the rate cut.