Foreign banks and brokerages expect the Reserve Bank of India (RBI) to deliver another 25 basis points (bps) repo rate cut in its April policy review, following the latest monetary easing.
Some economists believe the central bank will also introduce additional liquidity measures this month to support economic growth while keeping an eye on inflation and global interest rate trends.
Pranjal Bhandari, Chief Economist for India and Indonesia at HSBC Global Research, said, “We expect another 25 basis points cut in April, more liquidity measures in late February, and a review of several regulatory frameworks.” She noted that HSBC’s real rate calculations suggest a shallow rate-cutting cycle, with the RBI likely to inject enough liquidity to ensure reserve money grows in line with nominal GDP.
Anubhuti Sahay, Head of India Economic Research at Standard Chartered Bank, India, also expects a 25 bps repo rate cut in April but highlighted that further rate reductions would depend 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 said.
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Santanu Sengupta, Chief Economist at Goldman Sachs India, pointed out that easing food inflation is likely to keep headline inflation at around 4.5 per cent year-on-year in the first half of 2025. This, in turn, would provide room for the RBI to lower rates further. “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 stated.
Upasana Chachra, Chief India Economist at Morgan Stanley Research, echoed similar sentiments, stating that the RBI is adopting a pro-growth stance by easing rates, deferring regulatory tightening, and ensuring sufficient 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 noted 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 lacklustre, driven by weaker domestic demand and uncertainty from global factors,” she explained.
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Radhika Rao, Executive Director and Senior Economist at DBS Bank, reaffirmed her forecast of a 25 bps rate cut in April, with expectations that the repo rate would ease 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 said.
The RBI’s recent rate cut has sparked speculation about the trajectory of its monetary policy in the coming months. While most economists expect another 25 bps cut in April, the possibility of a longer easing cycle remains contingent on economic conditions, global interest rate movements, and inflation trends, economy watchers said.
