MPC likely to trim rate by 25 basis points in April meet: BS Poll

The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points, after a similar reduction in February, all the 10 respondents of the Business Standard poll said.

 

The RBI will announce the review of the policy meeting on April 9.

 

A softening retail inflation rate, which eased to a seven-month low of 3.61 per cent in February, down from 4.31 per cent in January, as food prices softened, has bolstered hopes for a second consecutive interest-rate reduction.

 

“The path for further policy easing appears quite clear and straightforward, with growth likely to be seen in a range which is deemed non-inflationary,” said Rahul Bajoria, head of India and Asean Economic Research, BofA Global Research.

 

Interestingly, the retail inflation rate is seen not exceeding 4 per cent for several months, raising hopes for deeper cuts to support growth. 

 

According to Soumya Kanti Ghosh, group chief economic advisor, State Bank of India, the retail inflation rate is likely to print below 4 per cent “for several months running into possibly Q3”.

 

Bajoria said: “Pressure on the exchange rate is coming down substantially.”

 

The rate-setting panel had kept the rate unchanged in 11 consecutive meetings. 

 

“From the central bank’s perspective, the inflation rate is steadily moving towards the 4 per cent target, with no immediate pressure for it to rise. As a result, there is confidence that inflation will continue to trend in that direction. This provides an opportunity to support the economy by lowering rates at this stage,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

Some respondents said the stance could be changed to “accommodative” while most were of the view that “neutral” was appropriate, given the volatile global financial conditions.

 

“We expect the rate-cut cycle to be shallow in 2025 and hence a ‘neutral’ stance remains appropriate,” said Gaura Sen Gupta, chief economist, IDFC FIRST Bank.

 

The panel had changed the stance to “neutral” in October from “withdrawal of accommodation”.

 

“Inflation continues to come down. On growth, the Q3 numbers were better than those of Q2. However, looking at the global situation, the RBI would like to continue providing support to growth,” said Sakshi Gupta, principal economist, HDFC Bank. Gupta sees a change in stance to “accommodative”.

 

A majority of the respondents do not see the RBI revising its growth and inflation forecast for next financial year. The central bank has forecast the inflation rate at 4.2 per cent for 2025-26. Growth is projected at 6.7 per cent for the financial year.