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RBI is further expected to cut the rates by 75 basis points in the successive MPC review in April 2025, the report mentions.
“Cumulative rate cut over the cycle could be at least 75 basis points, with two successive rate cuts over February and April 2025. with an intervening gap in June 2025, the second round of rate cuts could start from October 2025,” the report said.
Read more: RBI MPC Meeting Live Updates: Will governor Malhotra announce rate cuts today?
To give a push to drive the consumption demand, rate cuts are expected to complement the measures announced by Finance Minister Nirmala Sitharaman in the Union Budget 2025. Economists project that the tax relief up to Rs 12 lakh could give a boost to India’s consumption demand.
As per a Reuters poll, more than 70% of respondents expect that RBI would change the repo rates by 25 basis points to 6.25%. However, others expect that the rates would remain unchanged as the inflation is still above the target range set by the Reserve Bank.
RBI’s Repo Rate Trajectory
RBI, in the December MPC review meeting, left the policy rates unchanged at 6.50% for the 11th consecutive time. It was done to control the inflation and align it within the range of 2-6% tolerance band.
While the policy rates remained same for two years, last year in October MPC meet, the RBI changed its stance to ‘neutral’ from ‘withdrawal of accommodation’.
In the report, SBI Research expects that the inflation to come down to 4.5% in Q4FY25 with an average 4.8% in fiscal 2025, despite it rising gradually.
“Based on this trend, we expect FY26 inflation may come at 4.2-4.4 percent and core inflation in the range of 4.4 percent to 4.6 percent. By September 2025, core inflation may surpass headline inflation. Because of the base effect, headline inflation may average 3.6 percent to 3.8 percent in Q3 FY26,” said the report.
First Published: Feb 7, 2025 8:00 AM IST
