Retail inflation slipped up to 3.61% at a seven -month low of seven months low in February due to reducing prices of vegetables, eggs, and other protein -rich items in February, making a place for another deduction in the interest rate for RBI next month. File | Photo Credit: Reuters
The Reserve Bank of India (RBI) is likely to cut significant interest rates up to 25 basis points again this week, as low inflation provides support for an adjusted monetary policy stance, and needs to encourage development at a time when mutual tariffs announced by the US are giving a challenge to the global economy.
In February, the RBI Monetary Policy Committee chaired by Governor Sanjay Malhotra dropped the repo rate from 25 basis points to 6.25%. This was the first reduction since May 2020 and the first amendment after two and a half years.
The 54th meeting of MPC, rate-setting panel, is scheduled to start discussions on 7 April, and the decision will be announced on April 9, 2025.
RBI has kept the repo rate (short -term lending rate) unchanged since February 2023 at 6.5%. The last time the RBI reduced the rate, during the Kovid Times (May 2020), and after that, it gradually increased to 6.5%.
Chief economist Madan Sabnavis of Bank of Baroda said that the credit policy to be announced this week will come at one time when many things are happening all over the world and within the economy.
He said that the new era of tariffs imposed by the US would have some impact on the possibilities and currency, which the MPC would have to consider beyond the general evaluation of the economy status, he said.
“While it seems that in the event of this time, the possibilities of cutting the cuto rate for another 25 BPS cuts are clear, which are inhabited with the possibility of inflation and liquidity settled, it is also expected that the stance will be adjusted, which means that there may be a higher rate cut during the year.”
On 2 April, US President Donald Trump announced a mutual tariff of 11–49% in about 60 countries including India and China. This will be applicable from April 9, 2025.
According to experts, exports such as China Vietnam, Bangladesh, Cambodia and Thailand have challenges and opportunities for India as many competitive countries.
The rating agency ICRA also expects MPC to cut the rate of 25 BPS in its upcoming meeting, while maintaining a neutral stand.
“While the central bank’s liquidity interventions are likely to continue with the goal of the drain arising out of the upcoming drain and long tanner VRRS (variable rate repo) in their next book, we do not expect any major announcements around CRR cuts in MPC meetings,” said this.
The ICRA stated that recent announcements of liquidity injections The purpose is likely to reduce rapid transmission of rates.
Meanwhile, the industry body Asocham suggested that the upcoming monetary policy should adopt a waiting-and-worse stance instead of going to the rate cut at this stage.
“RBI has recently injected the liquidity in the market through various measures … We need to be patient for these measures to affect capex growth and consumption. Given this background, we believe that RBI is expected to keep the rates stable during this policy cycle,” said Sanjay Nair, president of Asocham.
He said that despite the challenges on the external front, the Indian economy is expected to be a strong rank in the new fiscal. About 6.7% of GDP growth for FY26 is a reasonable hope while retail inflation is expected to remain under investigation.
Retail inflation slipped up to 3.61% at a seven -month low of seven months low in February due to reducing prices of vegetables, eggs, and other protein -rich items in February, making a place for another deduction in the interest rate for RBI next month.
The consumer price index-based retail inflation was 4.26% in January and 5.09% in February 2024. Was seen in last July last.
Pradeep Aggarwal, founder and president of Signature Global (India) Limited, said that the Central Bank is expected to reduce the repo rate from 25 basis points, bringing it down to 6% to encourage consumption and run economic growth.
He said, “A low policy rate acts as a catalyst for increased lending, encouraging more individuals to invest in house purchases, increasing demand in the housing market,” he said.
However, the actual impact of this rate cut will largely depend on how effective and rapid commercial banks broadcast RBI policy decisions to borrowers, Mr. Aggarwal said.
Apart from the Governor of RBI, MPC has two senior central bank officials and three persons appointed by the government.
Published – 06 April, 2025 04:29 pm IST
