New Delhi, June 2 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.
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