Informist Poll
Repo rate cut seen again Apr, 75 bps of easing seen in total
This story was originally published at 17:37 IST on 10 February 2025
Register to read our real-time news.Informist, Monday, Feb. 10, 2025
By Shubham Rana
NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is expected to cut the repo rate again in April, after kicking off the expansionary cycle on Friday. In a poll by Informist, all but one of the 16 economists said the committee would cut the policy rate by another 25 basis points to 6.00% at its Apr. 7-9 meeting.
After standing pat on the repo rate for two years, the MPC finally relented last week, with RBI Governor Sanjay Malhotra saying the committee felt a "less restrictive monetary policy is more appropriate at the current juncture", given the growth-inflation dynamics. While the central bank expects headline retail inflation to decline to 4.2% in 2025-26 (Apr-Mar), it sees an uptick in GDP growth to 6.7%. Inflation is seen averaging 4.8% in FY25, with the government's first advance estimate of GDP pegging growth in the current financial year at a four-year low of 6.4%.
"Even as RBI and MPC abstained from providing any guidance for monetary policy easing, we anticipate the next round of cut will happen in the next April meeting itself. We expect the incoming inflation data in this period to be largely consistent with RBI forecasts for the quarter, with some scope of a lower surprise," economists at ICICI Securities Primary Dealership said in a note on Sunday.
CPI data for January will be released on Wednesday, with economists polled by Informist predicting a fall in inflation to 4.5% from 5.22% in December. The RBI on Friday trimmed its inflation forecast for Jan-Mar by 10 bps to 4.4%.
SHALLOW EASING CYCLE
Last week's rate cut was the first time in nearly five years that the MPC reduced interest rates, with the last such instance being in May 2020, a few weeks after the COVID-19 pandemic had struck. And while that particular rate-cut cycle amounted to a massive 250 bps, taking the repo rate from 6.50% to 4.00%, economists think the current one may be much shallower, with the average of 20 economists' predictions suggesting the policy rate may be lowered by another 50 bps in the coming months, with some even warning that the MPC may end up standing pat after April itself.
According to Kaushik Das, Deutsche Bank's chief economist for India, Malaysia, and South Asia, cutting rates sharply in the current cycle could create pressures for reversing the easing in quicker timeframe. Das, who does not expect another rate cut after April, does see "additional effective easing" of 25 bps through the liquidity channel and the RBI maintaining the repo rate at 6.0% "for a longer period of time, thereby providing stability to the economy".
HSBC's Pranjul Bhandari and Aayushi Chaudhary are also in the 50-bps rate cut camp. "Our real rate math suggests that this will be a shallow rate cutting cycle. An inflation forecast of 4.2% and a real neutral rate estimate of 1.75% points to a terminal repo rate of about 6%," the economists said on Friday.
To be sure, economists are divided about the extent of the easing in the current cycle, with some of the view that the repo rate may be cut by 100 bps in total, which would take the repo rate to 5.50%.
RELAXING THE STANCE
Rate cut apart, economists also expect the MPC to relax its stance from 'neutral' in the coming months. While "excessive volatility" in global financial markets, trade policy-related uncertainties, and risks from adverse weather events meant the MPC retained its neutral stance last week, Kotak Mahindra Bank Chief Economist Upasna Bhardwaj sees a shift to 'accommodative' occurring in either April or June, depending on "evolution of liquidity and global environment".
Economists also expect the RBI to announce more measures to inject liquidity into the banking system, with conditions expected to tighten further by the end of March despite the cash reserve ratio cut of 50 bps in December and INR 1.5 trillion worth of steps announced late January.
"...RBI would have to take additional liquidity measures this year if FPI outflows continue. For next year, it would have to undertake a mix of CRR cut, OMOs, buy-sell swap and long-term VRRs to infuse liquidity," ICICI Bank said on Friday.
Following are the expectations of respondents from the Apr. 7-9 meeting of the MPC:
| ORGANISATION | APRIL MPC MEET EXPECTATION |
| Barclays | 25 bps cut |
| Deutsche Bank | 25 bps cut |
| Goldman Sachs | 25 bps cut |
| HSBC | 25 bps cut |
| ICICI Bank | 25 bps cut |
| ICICI Securities Primary Dealership | 25 bps cut |
| IDFC FIRST Bank | 25 bps cut |
| India Ratings and Research | Status quo |
| Moody's Analytics | 25 bps cut |
| Morgan Stanley | 25 bps cut |
| Motilal Oswal Financial Services | 25 bps cut |
| Nirmal Bang Institutional Equities | 25 bps cut |
| Nomura | 25 bps cut |
| QuantEco Research | 25 bps cut |
| Standard Chartered Bank | 25 bps cut |
| YES Bank | 25 bps cut |
End
Edited by Avishek Dutta
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
