In his debut monetary policy as Reserve Bank of India (RBI) Governor, Sanjay Malhotra cut repo rate by 25-basis-points (bps), the first reduction in five years, to 6.25%, while maintaining a ‘neutral’ stance.
While highlighting the sequence of policy decisions leading up to the rate cut, Das said, in October, the MPC adopted a neutral stance, followed by a CRR cut and liquidity measures in December before the rate cut, which didn’t happen all at once.
Also Read | RBI MPC: FY25 inflation forecast unchanged at 4.8%; FY26 CPI projected at 4.2%
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, is cumulatively looking at a 50-bps rate cut. “With one already implemented, we have one more to go. It is better to proceed with back-to-back rate cuts, as the room for additional reductions will become increasingly limited.”
However, opinions on the timing of further rate cuts vary. Shobhit Mehrotra of HDFC Asset Management expressed caution regarding an April rate cut. “I am not too confident about another cut in April. There were multiple references to global headwinds, uncertainty, and financial market volatility. If these factors worsen, RBI may choose to wait and watch before deciding on the next rate move.”
Also Read | RBI to roll out ‘.bank.in’ domain for Indian lenders to combat financial fraud
Market participants are now closely watching global economic conditions and the US Federal Reserve’s moves. Das pointed out that the RBI is unlikely to cut rates beyond 50 bps unless the Fed enacts a more aggressive easing policy. “I don’t see the RBI cutting rates beyond 50 bps unless the Fed reduces rates by more than 100 bps, which seems unlikely in the near term.”
For the entire discussion, watch the accompanying video
Catch all the latest updates from the stock market here
Catch all the latest updates from the RBI Policy here
