Economists hopeful of an easing cycle after RBI’s first rate cut in five years

RBI Governor Sanjay Malhotra

Several economists are expecting another 75–100 bps rate cut during the next fiscal, citing easing inflation and softening growth, after the RBI moved to lower benchmark rates by 25 bps for the first time in five years on February 7.

The central bank's cautious-yet-supportive approach is expected to provide a much-needed boost to the economy, while keeping inflationary pressures under control, economists told Moneycontrol. They remain optimistic about further rate cuts in coming quarters, which would help both businesses as well as consumers, as the central bank attempts to spur demand and credit growth.

Balancing Growth and Stability

Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII) praised the move, calling it a 'huge boost' to the economy.

"The calibrated approach by the central bank reflects a careful balance between fostering economic growth and maintaining financial stability. The rate cut will complement the consumption-boosting measures announced in the Union Budget 2025–26, and strengthen domestic demand drivers," Chandrajit Banerjee said.

Banerjee also emphasised on the importance of recent liquidity measures, which he said will aid the transmission of rate cuts to productive sectors of the economy. RBI’s readiness to inject liquidity "when required will ensure effective policy transmission and protect against potential liquidity deficits," Banerjee added.

Read More: RBI Monetary Policy Highlights 2025

More Easing in 2025

Madhavi Arora, Chief Economist at Emkay Global Financial Services said that while the rate cut was widely expected, the focus now shifts to managing liquidity conditions.

"We expect the RBI to undertake additional Open Market Operations (OMOs) of around Rs 30,000 crore, bringing total OMOs to Rs 90,000–95,000 crore in FY25. Policymakers may prefer keeping sufficient tools in reserve, given the fluid global dynamics," Madhavi Arora said.

The Emkay economist also suggested more regulatory easing might follow if financial conditions remain tight. During the press briefing after the MPC statement, Governor Malhotra also clarified that draft LCR and project financing norms are not going to be implemented before March 2026.

Kotak Mahindra Bank’s Chief Economist Upasna Bhardwaj too echoed similar views. Bhardwaj said RBI must closely monitor liquidity conditions to keep them aligned with the monetary policy stance. "The softening growth and inflation outlook has created room for monetary easing, but liquidity conditions will need careful attention to avoid disruptions," Bhardwaj added.

Global Factors

Dharmakirti Joshi, Chief Economist at Crisil said the MPC’s move to reduce rates was driven by easing inflation and the need to boost growth. "With the Trump administration’s trade policies shaking up global markets, the RBI is expected to be proactive in using its liquidity and forex management tools. However, domestic inflation will remain a key determinant of future rate cuts," Joshi said.

He has projected the CPI inflation to fall to 4.4 percent next fiscal, aided by a healthy kharif and rabi crop, and anticipated another 75–100 bps of rate cuts during FY26.

"While the budget remains mildly supportive of growth, weather conditions and global trade policies will influence the MPC’s decisions," said the Crisil Chief Economist.

The Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal called the rate cut a 'pro-growth move' that will reduce borrowing costs.

"Lower EMIs on home and business loans will provide financial relief, boost disposable incomes, and enhance consumer spending. This will increase market liquidity and spur business investments," Khandelwal said.