February 24th 2025.
In a recent report, it was predicted that the Reserve Bank of India (RBI) will initiate a rate cut cycle of 25-50 basis points in order to boost economic growth. Additionally, the report stated that the RBI may also implement measures to ease liquidity. This decision comes after the RBI's Monetary Policy Meeting in February, where they began the rate cut cycle as expected. The report, conducted by Emkay Global Financial Services, noted that there was a general consensus among members of the MPC (Monetary Policy Committee) on the need for easing rates to support growth, especially with the improving inflation outlook.
Looking ahead, the report forecasts a gradual rate cut cycle and the possibility of regulatory measures being eased in the future. During the February meeting, all members, both internal and external, expressed the view that the lower inflation rate in recent months and the positive outlook for the future allow for a rate cut in order to support growth. This sentiment is echoed by a Kotak Research report, which predicts a further 25-50 basis points of rate cuts in the current fiscal year, citing the RBI's increased tolerance for the weakening Indian rupee and the inflation rate nearing the target of 4%.
Governor Sanjay Malhotra of the RBI emphasized the importance of strong policy frameworks and solid macroeconomic fundamentals in maintaining overall stability. He also stressed the need for monetary policy to strike a balance between keeping inflation in check and sustaining the high growth momentum in the country. The current estimated real GDP growth for the year is 6.4%, a decrease from the previous year's 8.2% growth. However, forecasts show a recovery in the second half of the fiscal year, with growth rates ranging from 6.3% to 6.8% for the year 2025-26.
In conclusion, the RBI's decision to initiate a rate cut cycle and potentially ease liquidity measures is a strategic move to spur economic growth. With a positive inflation outlook and the potential for a recovery in GDP growth, the RBI remains committed to maintaining a balance between price stability and growth in the Indian economy.
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