RBI may announce 25-50 bps rate cut amid softening inflation: Report

New Delhi [India], November 4 : The Reserve Bank of India may announce a rate cut of 25 to 50 basis points (bps) in the coming months as inflation continues to ease, supported by benign food prices and the impact of recent GST cuts, according to a report by Kotak Securities.

The report highlighted that softening inflation, led by lower food prices and the GST rate cuts, provides room for additional monetary easing to support economic growth, despite external headwinds from tariffs and trade-related challenges.

"Given benign food prices and GST cuts-led softening inflation amid external headwinds from tariff and trade-related issues, we continue to see scope for additional rate cuts of 25-50 bps to support growth," the report said.

However, it added that the timing and quantum of any potential rate cut will be a key decision for the central bank to ensure maximum impact from further monetary easing.

The report also noted that after keeping rates unchanged in October, the RBI remains focused on the full transmission of past policy actions while being cautious about possible upside risks to inflation in FY27.

In its October policy review, the RBI's Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate unchanged at 5.5 per cent, maintaining a "neutral" stance.

The Marginal Standing Facility (MSF) rate and Standing Deposit Facility (SDF) rate were also left unchanged at 5.75 per cent and 5.25 per cent, respectively.

The report also pointed out that the October policy was relatively dovish compared to the August review, as the central bank retained the possibility of further rate cuts based on evolving growth and inflation conditions.

The report added that consumer price index (CPI) inflation moderated to 1.5 per cent in September due to a contraction in food prices, while core inflation rose to 4.5 per cent because of a sharp uptrend in bullion prices.

It also said that the GST rate cuts have started showing partial passthrough in select items of the CPI basket, with the October reading likely to capture the remainder of the transient impact.

It also revised its inflation forecasts slightly higher, now estimating FY26 inflation at 2.1 per cent (earlier 2 per cent) and FY27 inflation at 4.1 per cent (earlier 4 per cent).

The report concluded that the RBI's policy approach in the coming months will balance the need to sustain growth while keeping inflation expectations anchored.

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