RBI Rate Cut? SBI Economist Predicts Wait Till Q3 FY25

SBI’s expert predicts a cautious approach from RBI on rate cuts.

A recent report by SBI’s chief economist, Soumya Kanti Ghosh, suggests the Reserve Bank of India (RBI) might hold off on lowering the repo rate until Q3 of FY25. This indicates a measured approach to easing monetary policy.

Highlights the balancing act of RBI

Understanding Repo Rate:

The repo rate, currently at 6.5%, is the interest rate at which RBI lends money to banks. By adjusting this rate, RBI influences the overall cost of borrowing in the economy.

Balancing Inflation and Growth:

Ghosh expects the RBI to maintain its current stance of gradually withdrawing its accommodative measures. This balancing act aims to control inflation while fostering economic growth.

Inflation Update:

Food prices are currently driving inflation, with some relief coming from stable fuel prices. The good news is that core inflation (excluding food and energy) has hit a 52-month low of 3.37%.

What to Expect in FY25:

  • Inflation is projected to decline until July, then rise to a peak of 5.4% in September before moderating again.
  • Overall CPI inflation for FY25 is expected to average around 4.5%, compared to 5.4% in FY24.

Market Reaction:

As the RBI’s first monetary policy meeting of the fiscal year approaches, market participants are watching closely. Ghosh’s analysis offers valuable insights into the factors impacting RBI’s decisions, helping investors and policymakers navigate the evolving economic landscape.

Stay informed! We’ll keep you updated as the monetary policy landscape unfolds.

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