Moody’s Calls RBI's 25-Basis Point Rate Cut a Timely Decision Amid Challenges
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Synopsis
Moody's Katrina Ell emphasizes RBI's timely rate cut amid uncertainty. The RBI's decision to lower the repo rate and adopt an accommodative stance is applauded, with predictions of further cuts in 2025 as the global economic landscape remains volatile.
Key Takeaways
- RBI cut the repo rate by 25 basis points to 6 percent.
- Shift in policy to 'accommodative' signals potential for more cuts.
- Moody’s forecasts a total rate cut of up to 75 basis points in 2025.
- Global uncertainty is impacting economic forecasts.
- GDP growth forecast revised down to 6.5% for 2025-26.
Mumbai, April 9 (NationPress) The Reserve Bank of India (RBI) has made a prudent choice by aligning with market expectations during a period of heightened uncertainty, stated Katrina Ell, Economic Research Director at Moody’s Analytics on Wednesday.
She articulated that the central bank's decision to lower the repo rate by 25 basis points to 6 percent and adjust its policy stance to ‘accommodative’ was well-timed, especially as the public is averse to additional surprises at this juncture.
“Uncertainty adversely affects economies, with widespread repercussions. In the last week, bond, currency, and equity markets have experienced erratic fluctuations due to the US government's tariff threats,” remarked Ell.
“In this unpredictable global context, the RBI’s steady response has mitigated further market volatility,” she added.
During its April policy meeting, the RBI proceeded with the anticipated benchmark interest rate cut. All members of the Monetary Policy Committee (MPC) supported both the rate reduction and the shift in stance from ‘neutral’ to ‘accommodative’.
This transition indicates that the central bank is open to additional rate reductions in the upcoming months if necessary.
Moody’s now predicts a cumulative rate cut of up to 75 basis points throughout the calendar year 2025. “The RBI has left the door ajar for further easing, depending on how economic conditions unfold,” Ell stated.
Madhavi Arora, Lead Economist at Emkay Global Research, noted that the change in policy stance signals the RBI’s willingness to react to global volatility.
“This response may manifest as further rate cuts or by ensuring sufficient liquidity within the financial system,” Arora mentioned. She also highlighted that uncertainty could continue to be a critical concern moving forward.
Simultaneously, the central bank’s MPC has revised its GDP growth forecast for 2025-26 to 6.5 percent, down from the previous estimate of 6.7 percent.
RBI Governor Sanjay Malhotra attributed this downgrade to escalating global trade and policy uncertainties following the recent US tariff hikes.
