RBI MPC Begins, Panel Likely To Slash Repo Rate By 25 Bps, Says SBI Research

As the Reserve Bank of India's Monetary Policy Committee (MPC) commenced its three-day meeting from April 7 to April 9, a report from SBI Research has projected that the central bank may lower the repo rate by 25 basis points in this policy review.

The report anticipated a total reduction of at least 100 basis points across the rate cut cycle, with consecutive rate cuts in February and April, followed by a pause in June, and the possibility of a fresh easing phase starting from August, reported IANS.

“During February 2025 to March 2026, we expect at least 100 bps cut in repo rate (25 bps already cut in February 2025 and another 75 bps rest of FY26), which will transmit exactly same to EBLR and 60 bps in MCLR,” the report noted.

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Inflation Trends and Economic Indicators

The RBI’s decision, expected on April 9, is likely to offer clarity on its policy direction and shed light on broader economic conditions. According to SBI Research, the projected average Consumer Price Index (CPI) inflation may decline to 3.8 per cent in the fourth quarter of FY25 and average 4.6 per cent for the full fiscal. For the 2025-26 fiscal year (FY26), inflation could stabilise in the 3.9-4.0 per cent range, with core inflation expected to hover between 4.2-4.3 per cent.

“Till September/October, headline inflation will be on downward trajectory but may increase thereafter. The US has imposed reciprocal tariff to many economies that is more than India’s. This will increase the fear of dumping into India by these countries resulting in lower inflation,” said the report.

The research note also emphasised that durable liquidity is expected to stay in surplus through FY26, supported by a combination of positive macroeconomic factors. These include open market operations (OMO) purchases, a likely dividend transfer from the RBI, and a balance of payments surplus estimated at $25-30 billion in the next fiscal year.

Additionally, the report pointed out that the neutral nominal policy rate, based on the prevailing natural rate estimates, stands at approximately 5.65 per cent. “Factoring in the average inflation envisaged and the output gap consequent upon different GDP scenarios, a cumulative policy rate reduction of 75-100 bps is likely going forward,” it added.

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