Foreign banks and brokerages are anticipating the Reserve Bank of India (RBI) to implement another 25 basis points (bps) repo rate cut during its April policy review, following the recent monetary easing. Some economists suggest that the central bank may also introduce additional liquidity measures this month to support economic growth, while also monitoring inflation and global interest rate trends.
Pranjal Bhandari, the Chief Economist for India and Indonesia at HSBC Global Research, expressed, “We expect another 25 basis points cut in April, more liquidity measures in late February, and a review of several regulatory frameworks.” She highlighted that HSBC’s real rate calculations indicate a shallow rate-cutting cycle, with the RBI likely to inject sufficient liquidity to ensure reserve money grows in line with nominal GDP.
Anubhuti Sahay, the Head of India Economic Research at Standard Chartered Bank, India, also predicts a 25 bps repo rate cut in April but emphasized that further rate reductions would hinge on the global interest rate outlook. “We maintain our view of a 25 basis points repo rate cut in April. Further rate cuts depend on global rates outlook,” she stated.
Santanu Sengupta, the Chief Economist at Goldman Sachs India, noted that easing food inflation is expected to maintain headline inflation at around 4.5 per cent year-on-year in the first half of 2025. This would create room for the RBI to continue lowering rates. “Going forward, we expect headline inflation at 4.5 per cent year-on-year in 1HCY25 on the back of easing food inflation, which would allow the RBI to follow up today’s cut with an additional 25 basis points policy repo rate cut in the April meeting. The risks, however, are skewed towards a slightly deeper easing cycle,” he explained.
Echoing similar sentiments, Upasana Chachra, the Chief India Economist at Morgan Stanley Research, mentioned that the RBI is taking a pro-growth stance by easing rates, deferring regulatory tightening, and ensuring adequate liquidity. “We expect another rate cut of 25 bps in the April policy review, which may likely be the last cut,” she said. She also highlighted that liquidity management would remain a key focus for the central bank. “Morgan Stanley Research expects RBI to proactively manage liquidity and take up some additional measures, such as open market operations (OMO) purchases or FX swaps, as the liquidity deficit rises towards end-March. We see a risk of a longer rate-cut cycle if growth recovery is lackluster, driven by weaker domestic demand and uncertainty from global factors,” she added.
Radhika Rao, the Executive Director and Senior Economist at DBS Bank, reaffirmed her forecast of a 25 bps rate cut in April, with expectations of the repo rate easing to 5.75 per cent by the end of 2025. “We maintain our call for another 25 basis points cut in April and expect the end-2025 repo rate to ease to 5.75 percent,” she concluded.
The recent rate cut by the RBI has sparked discussions about the future trajectory of its monetary policy. While most economists anticipate another 25 bps cut in April, the potential for a more prolonged easing cycle is contingent on economic conditions, global interest rate movements, and inflation trends, according to economy watchers.
