RBI Likely To Initiate Rate Cuts In October, Predicts Crisil

India’s central bank Reserve Bank of India (RBI) is anticipated to begin lowering interest rates around October, reveals Crisil report. The report assumes, there are no disruptions from external factors such as weather conditions or international commodity prices.

Further, Crisil also predicts ‘two rate cuts this fiscal year.’ Moreover, the credit rating agency also stated that the recent decision by the Monetary Policy Committee (MPC) to maintain rates was largely influenced by elevated food inflation. It also noted that climate conditions, including frequent weather changes, need to be closely monitored.

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Looking ahead, Crisil expects an improved macroeconomic environment, which could support a rate cut.

Talking about the rate cut, the report said ‘The challenge of food inflation is expected to ease as agricultural prospects improve compared to last year. With the monsoon being 7 percent above the long-term average as of August 7 and sowing activities increasing across major food grains, clearer agricultural prospects by September are likely to pave the way for a rate cut.’

RBI Keeps Repo Rate Unchanged

Earlier,  in response to ongoing economic uncertainties, the RBI has opted to keep the repo rate unchanged at 6.5 percent.

This decision to maintain the repo rate comes amid persistent inflation concerns that remain above the RBI’s target range. The central bank continues to face challenges in achieving its 4 percent inflation target due to sustained food inflation and other economic factors.

The report also highlighted potential upward pressures on core inflation from factors such as international freight costs, geopolitical risks affecting crude oil prices, and increases in domestic telecom tariffs.

Must Read: RBI Governor Shaktikanta Das Predicts 7.2% GDP Growth for 2024-25, Notes June Inflation Drop to 5.1%

Regarding economic growth, the report projected a slowdown this year due to reduced fiscal support as the government focuses on fiscal consolidation.

But during August 8 MPC meeting, RBI Governor Shaktikanta Das projected a real GDP growth rate of 7.2 percent for the fiscal year 2024-25. Governor Das  also stressed that the RBI remains vigilant about inflationary pressures and will take necessary actions to maintain price stability while supporting economic recovery.

(With Inputs From ANI)