More cuts on the anvil, 78% probability of RBI cutting rate in April: MC Poll

RBI MPC may deliver another cut in April, as per MC poll

The Reserve Bank of India’s monetary policy committee, which went for its first repo rate cut in nearly five years early this month, will likely continue on the path, with most economists predicting another drop in rates in the upcoming April meeting, a Moneycontrol poll has found.

Nearly 90 percent of the 19 economists polled by Moneycontrol expect the MPC to deliver a 25 basis points (bps), or 0.25 percentage point, cut when it meets from April 3-5.

The probability of an April cut is pegged at 78 percent.

“RBI MPC may cut at least once more after April but that cut may happen around the second half of fiscal when inflation is more closely aligned with target and with the FOMC poised to ease again around that time also. However, Fed easing is not a prerequisite to some more cuts from MPC,” said Abhishek Upadhyay, senior vice president, ICICI Securities Primary Dealership.

The probability of a rate cut was lower at 45 percent for the June meeting and 50 percent for the meeting scheduled in August.

Early this month, the central bank’s rate-setting panel lowered the policy rate to 6.25 percent from 6.5 percent. The stance, however, was left unchanged at “neutral”, giving the RBI the flexibility to navigate a tense geopolitical environment.

“With growth likely to average sub-6.5 percent in FY25, in our view, and February inflation expected to edge towards 4 percent, the central bank is poised to stay on a calibrated dovish path,” said Radhika Rao, senior economist, DBS.

Economists expect the policy rate to fall to 5.75 percent by the end of the financial year 2025-26, with some predicting just one more 25 bps cut till the end of the fiscal.

Not an easy task

The possibility of the US Federal Reserve deciding against more cuts due to price pressures building from tariffs may also limit the RBI’s Indian ability to cut rates.

“Another factor which will limit RBI’s ability to cut interest rates is the substantial depreciation pressures on the INR. Monetary policy will need to consider domestic factors as well as heightened volatility on the external front. We expect further policy rate cuts by RBI of 25bps to 50bps this year,” said Gaura Sengupta, chief India economist, India Ratings and Research.

Moneycontrol earlier wrote that the RBI rate cycle is likely to be sub-optimal given pressures on the rupee and tariffs constraining Fed’s ability to cut rates.

“India’s current account deficit remains manageable but foreign portfolio outflows continue. We expect the ongoing trade-war uncertainty and the potential depreciation of CNY to weigh on the rupee. However, we expect that the RBI will intervene to prevent any sharp depreciation of the rupee,” said Rajani Sinha, chief economist, CareEdge.

A Moneycontrol poll pegs the FY25 growth at 6.4 percent, in line with the first advance estimate released in January. Economists have pegged FY26 growth only marginally higher at 6.6 percent.