Interest rate cuts likely only after QI FY25, say economists

Economists are paring back their expectation of a rate cut to beyond the first quarter of fiscal year 2025, following a hawkish policy stance from the Reserve Bank of India.

- Gopika Gopakumar

In its recent policy last week, RBI Governor Shaktikanta Das made it clear that the central bank’s inflation target is 4% and not 2 to 6%. According to RBI’s estimates, inflation is expected to average 4.5% in fiscal year 2025. In fact RBI is expecting inflation to fall below 4% to a range of 3.8-5.2% next fiscal, if monsoon remains normal and there are no further policy shocks.

“If inflation is at 4% or below 4% on a durable basis, that may call for a rethink. But not at the moment," said Das during the press conference after the monetary policy meeting.

Economists now expect RBI to cut rates only in second half of fiscal 2025 when inflation may soften to near 4% target.