
RBI Expected to Cut Repo Rate by 100 bps by 2025 End: Nomura
The Reserve Bank of India (RBI) is expected to cut the repo rate by 100 basis points (bps) from 6% to 5% by the end of 2025, according to a recent report by Nomura. This prediction is based on the underperformance of both GDP growth and inflation in the country.
In its ‘Asia H2 Outlook’ report, the global brokerage noted that the GDP growth in India has been lower than expected, with the country’s GDP growth rate standing at 6.2% compared to the RBI’s projection of 6.5%. Additionally, inflation has been under pressure, with the Consumer Price Index (CPI) inflation rate standing at 3.3% compared to the RBI’s target of 4%.
The RBI has been maintaining a hawkish stance on interest rates in recent times, despite the economic slowdown. The central bank has been focusing on achieving its medium-term inflation target of 4%, which has led to a series of rate hikes in the recent past. However, with GDP growth slowing down and inflation under control, the RBI is likely to reassess its stance and cut interest rates to boost economic growth.
The expected cut in the repo rate by 100 bps would be a significant move by the RBI, as it would provide a much-needed boost to the economy. Lower interest rates would make borrowing cheaper, which would stimulate consumption and investment, and help to boost economic growth. Additionally, a cut in the repo rate would also help to reduce the burden on borrowers, who have been facing high interest rates in recent times.
The Nomura report also noted that the RBI has been focusing on achieving its inflation target, and has been using a combination of monetary and fiscal measures to achieve this goal. The report noted that while inflation has been under control, the RBI has been concerned about the risks to inflation from the global economy, particularly from the ongoing trade tensions.
The RBI has been closely monitoring the global economic situation, and has been taking steps to mitigate the risks to the Indian economy. The central bank has been building up its foreign exchange reserves, and has been using these reserves to stabilize the rupee. Additionally, the RBI has been providing liquidity to the financial system, and has been using its monetary policy tools to stabilize the economy.
The expected cut in the repo rate by 100 bps would be a welcome move by the RBI, as it would provide a much-needed boost to the economy. The move would help to stimulate consumption and investment, and would provide relief to borrowers who have been facing high interest rates in recent times. However, the RBI would need to carefully balance its inflation target with the need to boost economic growth, as higher inflation could have negative consequences for the economy.
In conclusion, the RBI is expected to cut the repo rate by 100 bps from 6% to 5% by the end of 2025, according to a recent report by Nomura. The move would be a significant step by the RBI to boost economic growth, and would provide relief to borrowers who have been facing high interest rates in recent times. However, the RBI would need to carefully balance its inflation target with the need to boost economic growth, as higher inflation could have negative consequences for the economy.