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Key Points

Analysts anticipate the Reserve Bank of India (RBI) will implement another 25 basis point rate cut in its upcoming meeting, following a consistent trend due to cooling inflation rates. The reduction in lending rates is expected to bolster domestic demand and consumption. Experts, including Madan Sabnavis from Bank of Baroda, highlight a conducive environment for rate cuts, with manageable inflation and supportive liquidity conditions. The RBI's actions align with its goal to maintain adequate liquidity and foster economic growth while considering global economic dynamics.

Key Points: RBI Likely to Approve Another Rate Cut Amid Cooling Inflation

  • RBI might announce a 25 bps rate cut due to low inflation
  • Recent rate cuts aim to improve domestic consumption and industrial activity
  • Analysts suggest more rate cuts possible this fiscal
2 min read

RBI MPC likely to go for 25 bps rate cut on June 6 as inflation cools: Analysts

Analysts predict RBI cuts rates again as inflation eases, boosting consumption and demand.

"We expect domestic consumption demand to improve. - Crisil Note"

New Delhi, June 2

As the RBI’s Monetary Policy Committee (MPC) is set to meet later this week, analysts on Monday expected the Central Bank to go for a third consecutive rate cut of 25 basis points as inflation continues to remain below the median target of 4 per cent.

The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until April this year.

Bank lending rates have begun easing, which should support domestic demand, according to a latest Crisil note.

“Improving domestic consumption is likely to support industrial activity. We expect domestic consumption demand to improve, driven by healthy agricultural growth, easing inflation supporting discretionary spend and income tax relief this fiscal,” it noted.

According to Madan Sabnavis, Chief Economist at Bank of Baroda, “we do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on June 6”.

The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters.

“It is also expected that the RBI will detail its analysis on how the global environment would be affecting the Indian economy considering that the tariff reprieve provided by the USA would end in July,” Sabnavis added.

The Reserve Bank has said it will continue to undertake liquidity management operations in sync with the monetary policy stance to keep system liquidity adequate to meet the productive requirements of the economy.

A benign inflation outlook and moderate growth warrant monetary policy to be growth-supportive, while remaining watchful about the rapidly evolving global macroeconomic conditions, said the Central Bank in its ‘2024-25 annual report’.

The RBI MPC in its April meeting unanimously voted to reduce the policy repo rate by 25 bps to 6.0 per cent. Moreover, the MPC also decided to change the stance from neutral to accommodative.

- IANS

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Reader Comments

R
Rahul K.
Finally some good news for home loan borrowers! 🏠 This rate cut will help middle-class families like mine who are struggling with EMI payments. Hope banks pass on the full benefit to customers this time.
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Priya M.
While rate cuts are welcome, I'm concerned about inflation creeping back up if monsoon fails this year. RBI should be cautious - we've seen how quickly vegetable prices can spike in India.
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Amit S.
As a small business owner, lower interest rates mean easier working capital loans. But banks still make it very difficult for MSMEs to access credit. RBI should focus on implementation at ground level.
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Neha P.
Good move! This will boost consumer spending before the festive season. Hopefully we'll see better discounts on electronics and appliances during Diwali sales this year. 🎉
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Vikram J.
RBI is doing balancing act between growth and inflation. But with US Fed rates still high, won't this widen interest rate differential and put pressure on rupee? Global factors can't be ignored.
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Sunita R.
Fixed deposit investors like senior citizens will suffer again with lower returns. RBI should think about all sections of society, not just borrowers. Maybe introduce special FD schemes for elders?

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