As the Reserve Bank of India (RBI) began its Monetary Policy Committee (MPC) meeting (from April 7 to April 9) here, SBI Research on Monday said it expects a 25-basis-point rate cut in the policy, and that the cumulative rate cut over the cycle could be at least 100 basis points, with two successive rate cuts in February and April.
With an intervening gap in June, the second round of rate cuts could start from August, the SBI report said.
“During February 2025 to March 2026, we expect at least a 100 bps cut in the repo rate (25 bps already cut in February 2025 and another 75 bps during the rest of FY26), which will transmit exactly the same to EBLR and 60 bps to MCLR,” the report mentioned.
The report further stated that, based on available estimates of the natural rate, the neutral nominal policy rate works out to 5.65 per cent.
“Factoring in the average inflation envisaged and the output gap arising from different GDP scenarios, a cumulative policy rate reduction of 75–100 bps is likely going forward,” it added.
The RBI MPC’s decision is scheduled to be announced on April 9, and will provide key insights into the Reserve Bank’s policy stance and India’s economic outlook.
CPI inflation may come down to 3.8 per cent in Q4 FY25 and average 4.6 per cent in FY25.
Average CPI inflation may be in the range of 3.9–4.0 per cent in FY26, while core inflation is expected to range between 4.2–4.3 per cent.
“Till September/October, headline inflation will be on a downward trajectory but may increase thereafter. The US has imposed reciprocal tariffs on many economies—more than India’s. This will increase fears of dumping into India by these countries, resulting in lower inflation,” the report said.
Moreover, durable liquidity is likely to remain in surplus in FY26, supported by several factors such as OMO purchases, the RBI’s dividend transfer, and a balance of payments (BoP) surplus of around USD 25–30 billion in FY26, the report mentioned.
(Inputs from ANS)