RBI to Cut Rates? Credit Policy Announcement Today

Mumbai, Apr 8 (PTI) RBI Governor Sanjay Malhotra will announce the first bi-monthly monetary policy of the current fiscal on Wednesday, the central bank said, amid expectations of a 25 basis points reduction in the short-term lending rate.

RBI's Monetary Policy Committee (MPC) headed by Governor Malhotra started its three-day deliberations on the next set of credit policy on Monday.

In February, the MPC slashed the repo rate by 25 basis points to 6.25 per cent. It was the first reduction since May 2020 and the first revision after two-and-a-half years.

Experts are of the view that the RBI will again reduce the rate by 25 bps on Wednesday against the backdrop of moderating inflation and the need to stimulate growth as Trump tariffs pose severe challenges to the global economy.

"Monetary Policy Statement by RBI Governor @GovSMalhotra at 10:00 AM (on April 9)," the RBI said in a post on social media platform 'X'.

US President Donald Trump has announced a hefty 26 per cent reciprocal tariff rate on India, effective April 9.

Coincidentally, the MPC decision will be announced on April 9, the day when the reciprocal tariff kicks in.

An HSBC Global Research report said:"We expect the RBI to deliver a 25 bps repo rate cut in April, taking the repo rate to 6 per cent. We also expect it to discuss/implement steps that help sustain liquidity at surplus levels. We believe the RBI may lower its growth and inflation forecasts. Following the April rate cut, we expect two more rate cuts of 25bp each in the June and August meetings, taking the repo rate to 5.5 per cent, which is our estimate of neutral."

Goldman Sachs too expects a 25 bps repo rate cut.

A moderation in domestic activity in the first quarter based on the high frequency data, benign inflation and a sharp pullback in Brent crude oil and the DXY Index (dollar index) post President Trump's tariff announcements have created a favourable environment for the RBI to ease, it said.

"...our expectation of a sub-4 per cent headline inflation by Q4 CY25, we added an additional 50 bps of repo rate cuts by the RBI in CY25, totalling 100 bps of repo rate cuts in this cycle," said a Goldman Sachs report.

Rohit Arora, CEO and co-founder, Biz2Credit and Biz2X opined that amid easing domestic inflation and a supportive CPI inflation print, expectations of a rate cut may appear timely.

However, the evolving global backdrop, particularly renewed tariff risks and narrowing interest rate differentials with the US, has introduced fresh complexities into the policy calculus.

Real estate developer Sanjeevini Group chairman and founder Umesh Gowda H A said the impact of Trump tariffs on global growth will be felt as trade slows down in major economies affecting global growth.

"Amid this, as India's inflation is on a decline, the RBI must cut rates by 50 bps in order to spur investment in order to enable businesses to invest in capex and fulfil the global demand. On the domestic front, a reduction in rates will drive up consumer demand across sectors and help push back against global uncertainties," Gowda said.

Ashok Kapur, chairman, Krishna Group and Krisumi Corporation said that in the upcoming monetary policy review meeting, the central bank is expected to further support the economy and borrowers by reducing the policy rate by 25 basis points.

"This anticipated rate cut would not only inject more liquidity into the market but also stimulate borrowing and spending, leading to increased economic activity. The housing sector, in particular, stands to benefit significantly, as lower interest rates would further reduce home loan EMIs, making homeownership more affordable for a larger section of buyers," Kapur said.

Ankita Pathak, macro strategist and global equities fund advisor at Ionic Asset by Angel One too said that amid global uncertainties, the RBI is likely to cut rate by 25 bps, with an expectation of a change in stance to accommodative from the current neutral.

India is relatively better than the rest of Asia as far as tariffs are concerned, but it is unlikely that it will not see any ripple effect from a global slowdown, she said.

"There will likely be a downward revision to growth and inflation. India has needed monetary reflation even before Trump's tariffs, and the need for it to support growth, as well as the ability to do so, is now the strongest. It must, therefore, flow through both rate cuts and surplus liquidity maintenance," Pathak said.

Ayush Lohia, CEO, Zuperia Auto was of the view that the upcoming RBI monetary policy is a crucial juncture for the economy, and expects measures that will boost growth and stimulate demand.

"For the EV sector, a reduction in interest rates and increased liquidity would be a significant boost, enabling consumers to adopt electric vehicles and driving the industry's growth," Lohia said.

Besides the Governor, the MPC has two senior central bank officials and three persons appointed by the government.