NEW DELHI — As the RBI’s Monetary Policy Committee (MPC) is set to meet later
this week, analysts on Monday expected the Central Bank to go for a third
consecutive rate cut of 25 basis points as inflation continues to remain below
the median target of 4 per cent.
The Central Bank is projected to cut the repo rate by
another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until
April this year.
Bank lending rates have begun easing, which should
support domestic demand, according to a latest Crisil note.
“Improving domestic consumption is likely to support
industrial activity. We expect domestic consumption demand to improve, driven
by healthy agricultural growth, easing inflation supporting discretionary spend
and income tax relief this fiscal,” it noted.
According to Madan Sabnavis, Chief Economist at Bank of
Baroda, “we do believe that given the rather benign inflation conditions and
the liquidity situation which has been made very comfortable through various
measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on
June 6”.
The commentary on both growth and inflation will be
important as there are expectations of revisions in their forecasts for both
the parameters.
“It is also expected that the RBI will detail its
analysis on how the global environment would be affecting the Indian economy
considering that the tariff reprieve provided by the USA would end in July,”
Sabnavis added.
The Reserve Bank has said it will continue to undertake
liquidity management operations in sync with the monetary policy stance to keep
system liquidity adequate to meet the productive requirements of the economy.
A benign inflation outlook and moderate growth warrant
monetary policy to be growth-supportive, while remaining watchful about the
rapidly evolving global macroeconomic conditions, said the Central Bank in its
‘2024-25 annual report’.
The RBI MPC in its April meeting unanimously voted to
reduce the policy repo rate by 25 bps to 6.0 per cent. Moreover, the MPC also
decided to change the stance from neutral to accommodative.
