RBI annual report bats for dovish monetary policy, cites benign inflation outlook, moderate growth

Reserve Bank of India

A benign inflation outlook and moderate growth warrant monetary policy to be growth-supportive, the Reserve Bank of India's 2024-25 annual report, released on May 29, has said.

The central bank will remain watchful of rapidly evolving global macroeconomic conditions as well as geopolitical developments, it said.

The RBI’s monetary policy committee (MPC) started the rate cutting cycle early this year, with 25 basis points (bps) cuts to repo rate in February and April to support growth. The repo rate now stands at 6 percent.

The rate-setting panel also changed the stance from neutral to accommodative in the April policy.

The central bank is expected to further cut rates by 50 bps this fiscal.

A Moneycontrol poll of economists and treasury heads expects the MPC to cut the repo rate by 25 bps when it meets for the bi-monthly review from June 4-6.

The report said the central bank 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.

The RBI will deploy an appropriate mix of instruments to modulate frictional as well as durable liquidity, ensuring orderly movement of money market interest rates, the report said.