Rate cut expected in February, but confidence lower than before: MC Poll

RBI to hold rates in December, may go for a cut in February say economists

Most economists are pencilling a 25-bps interest rate cut in the February meeting of the Monetary Policy Committee, but the confidence is dwindling amidst rising geopolitical uncertainties, high inflation and stable growth, according to a Moneycontrol poll of 10 economists.

In a poll conducted between November 19 and 21, economists pegged the probability of a rate cut in February 2025 at 60 percent, lower than the 68 percent probability assigned during the last poll conducted on October 15.

Global uncertainty and urban consumption slowdown were pegged as major impediments to growth by economists.

The MC poll reduced the probability of a rate cut in December to 0, from 25 percent on October 15.

Data released on November 12 showed retail inflation rose to a 14-month high of 6.2 percent in October, compared with 5.5 percent in the previous month.

The high inflation print further lowered the possibility of a rate cut, which was a high 75 percent in a September poll.

Food inflation was the main culprit of rising consumer prices in the month, as it hit double digits for the first time in 15 months.

Experts indicate that inflation will likely stay elevated in November before it starts cooling from December onwards.

While the MC poll suggests that the Reserve Bank will go for a sole rate cut in the February meeting bringing the rate down to 6.25 percent, they do not expect many cuts in FY26 either.

The probability of a rate cut in April was 60 percent, unchanged from the previous poll.

Median forecasts predict rates to settle at 5.75 percent by the end of FY26.

Higher inflation prints, growth to stay put

Inflation forecasts were also increased, with economists predicting 4.7 percent growth in FY25, compared with an August poll forecast of 4.5 percent.

RBI has been expecting inflation to fall to 4.5 percent in FY25 from 5.4 percent in the previous year. However, economists contend that the economy is likely to miss the inflation target for the third quarter.

The poll of 11 economists pegged the economy to slow down only slightly to 6.5 percent in the second quarter of FY25 compared with 6.7 percent growth in the year's first quarter.