Crime Today News
The Reserve Bank of India’s six-member rate-setting Monetary Policy Committee is likely to go for a 25 basis point cut in the repo rate to support growth, which is facing external headwinds such as global financial market volatility, geopolitical tensions, trade fragmentation, and supply chain disruptions.
What may give comfort to the committee members to vote for a rate cut at their upcoming meeting scheduled for June 6 is the fact that retail inflation continues to stay below their lower tolerance level of 4 per cent.
GDP growth in Q4FY25, at 7.4 per cent, while higher than the preceding quarter’s 6.4 per cent, is lower than the year-ago period’s 8.4 per cent.
Retail inflation softened to 3.16 per cent in April 2025 (against 3.34 per cent in March), a six-year low, largely due to a decline in food product prices.
In the current calendar year so far, the MPC has cut the repo rate (the interest rate at which banks borrow funds to overcome short-term liquidity mismatches) twice (in February and April) by 25 basis points (bps) each, bringing it down to 6 per cent from 6.50 per cent.
Madan Sabnavis, Chief Economist at Bank of Baroda, said: “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 the 6th.”
“The commentary on both growth and inflation will be important, as there are expectations of revisions in their forecasts for both parameters.”
He added that the RBI is also expected to detail its analysis on how the global environment could affect the Indian economy, considering that the tariff reprieve provided by the USA is set to end in July.
Madhavi Arora, Chief Economist at Emkay Global Financial Services, said: “Even though we see a liquidity deluge in the coming months, we do not see it impeding a June rate cut or the depth of the easing cycle.”
“We maintain terminal policy rate could reach 5.25 per cent (+/-0.25 pre cent), while system liquidity will end FY26 at a surplus of ~0.9-1.1 per cent of NDTL (net demand and time liabilities) — lower than past easing cycles. That said, improving transmission tools should help in better real sector percolation.”
She expects the 10-year yield to ease to 6.0 per cent by end-CY25, while a bull steepening bias is likely to strengthen in the near term.
Barclays, in a report, noted that the higher-than-expected growth outcome in Q4FY25 — at 7.4 per cent year-on-year compared with 6.4 per cent in Q3FY25 — may raise questions around the RBI MPC’s actions in the coming week.
“We believe the growth-inflation balance will still prompt the MPC to deliver another 25 bps repo rate cut at the June 6 meeting,” the report said.
Published on June 1, 2025
This article first appeared on The Hindu Business Line
📰 Crime Today News is proudly sponsored by DRYFRUIT & CO – A Brand by eFabby Global LLC
Design & Developed by Yes Mom Hosting
