Archive Photo: Bank of the Indian Reserve (RBI) | Photo credit: Francis Mascarenhas
The Bank of the Reserve of India (RBI) will probably reduce the repo rate by up to 100 basic points (BP) more in the current flexibility cycle, economists say. The RBI, under Governor Sanjay Malhotra, has reduced the repo rate twice in 25 bps each to 6 percent currently.
The RBI Monetary Policy Committee (MPC) also changed its neutral policy position to accommodation, signing probability or tariffs of rates or status quo onwards.
“We have a long hero of the opinion that this flexion cycle was not superficial and the terminal rates would settle in neutral. However, with a growth below the potential, the fall in oil prices and inflation aligned with the objective, we stayed at 5 percent (from 5.50 percent), which implies additional 100 BPS in the cuts of fees at the end of 2025 (25 BP in each From consecutive meetings in June, August, August, and December), they say).
According to Nuvama’s investigation, in general, the RBI has begun to relax its restrictive monetary policy through a combination of liquuidity cuts and injections. The change to a well -off posture further indicates the possibility of additional rate reductions ahead.
“We anticipate the decrease in the repo rate to 5–5.25 percent in the course of this flexibility cycle. In the liquidity front, we hope that the RBI will remain proactive to guarantee stable and adequate liquidity conditions within the banking system,” he said.
Growth dynamics
Rajani Sinha, chief economist of care caregivers, says that the change in the MPC position towards the accommodation indicates that advancing the MPC approach will be supporting in the midst of the silent inflationary pressure.
While the RBI has cut the growth projection for Fy26 to 6.5 percent, Sinha feels that GDP growth could simply be lower by around 6.2 percent, taking into account the direct impact of the reciprocal tariff in around 0.2-0.3 percent of GDP.
“It is likely that inflation remains off, although our projection for the average CPI for Fy26 is 4.2 percent (marginally higher than RBI’s projection), since we are still concerned about uncertainties and balloons related to balloons.
Gaura Sen Gupta, chief economist of IDFC First Bank, shared similar opinions, saying that his internal evaluation shows an abundant impact on the growth of tariffs of around 0.5 percent, which has not been baked in the estimation of GDP.
“We hope that the speed cutting cycle will be deeper after the change from posture to accommodation. Now we see another 50 BPS cut in the 2025 v/s reminder above of 25 Pb. Another factor is the comfort in the inflation of the inflation of the inflation of the inflation of 4 orientable alignments of FY26,” he said.
Posted on April 14, 2025