RBI may ease by 25 bps, while maintaining a neutral stance

The central bank had revised its inflation forecast significantly downward in the last policy

We expect the Reserve Bank of India (RBI) to cut the policy rate by 25 basis points (bps) on August 2, thereby pushing the repo rate down to 6 per cent. Since April, the Consumer Price Index (CPI) inflation has been surprising to the downside, and the June inflation print came at 1.5 per cent, which is 50 bps below the lower band of the RBI’s mandated target of maintaining inflation within the 2-6 per cent range. CPI-based inflation, excluding food and fuel, which has been a key concern for the Monetary Policy Committee members, also moderated below 4 per