RBI Policy Preview: Will RBI Precede US Fed in Rate Cuts?

As the Reserve Bank of India (RBI) gears up for its first monetary policy meeting of the financial year, there’s speculation among market participants about potential rate cuts amidst economic uncertainties. While prevailing sentiments hint at the RBI maintaining current policy rates, there’s a lingering question of whether the central bank might move before the US Federal Reserve.

Given the robust state of the Indian economy and persistent inflation above the 4 percent target, experts believe the RBI is unlikely to rush into rate cuts. Instead, they anticipate the central bank to employ alternative tools to manage excess liquidity effectively.

Scheduled for Friday, April 5, RBI Governor Shaktikanta Das will unveil the policy decision of the Monetary Policy Committee (MPC). Here’s a roundup of insights from leading analysts offering perspectives on expectations from the RBI, the likelihood of preceding the US Fed in rate cuts, and potential market reactions:

-> Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India: Ghosh underscores the influence of past movements in US rates on major emerging economies, suggesting a potential delay in rate cuts until Q3FY25, with expectations of a shallow rate-cut cycle.

-> Madhavi Arora, Lead Economist at Emkay Global Financial Services: Arora predicts the RBI may synchronize with the Fed on rate actions while emphasizing the importance of liquidity management and yield curve dynamics.

-> Achala Jethmalani, Economist, RBL Bank: Jethmalani anticipates a status quo policy, focusing on CPI inflation revisions and potential reactions in the bond market.

-> Tanvee Gupta Jain, Chief India Economist, UBS India: Jain suggests the MPC may maintain policy settings in April, with a shift to a “neutral” stance expected in June, aligning with a gradual rate cut cycle.

-> Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays: Bajoria forecasts the MPC to keep the repo rate unchanged, citing declining core inflation and easing liquidity management.

-> Suman Bannerjee, CIO, Hedonova: Bannerjee expects the RBI to uphold stability by holding the repo rate, which could bolster positive market sentiment.

-> CARE Ratings: CARE Ratings anticipates potential rate cuts in the second half of FY25, highlighting the RBI’s cautious approach amid evolving risks associated with food inflation.

While these insights offer diverse perspectives, investors are urged to seek guidance from certified experts before making investment decisions, considering the evolving economic landscape.