NEW DELHI: The Reserve Bank of India’s April policy meeting minutes indicate that the door is open for a third straight repo rate cut in June, believes Radhika Rao, Executive Director and Senior Economist at DBS Bank
“The policy stance was revised to ‘accommodative’ from ‘neutral’, signalling the bias for the rates to either stay on pause or be lowered from current levels,” Rao noted.
On trade, Rao said there was growing optimism around India’s position. She pointed to India’s relatively smaller exposure to US exports and its lower indicative tariff rates compared to some ASEAN peers. “Affirmative signals from the US administration that a bilateral agreement between the two countries was in the offing” have also buoyed sentiment, she said.
She pointed out that members of the Monetary Policy Committee (MPC) who favour a dovish approach have cited a clear moderation in inflation and sluggish economic growth as justification for further cuts. “Growth is at less than aspirational levels,” she said, adding that this creates room to support the economy through lower interest rates.
Rao also acknowledged the challenges posed by global trade disruptions, which she said are creating additional downside risks. While some external members of the MPC expressed caution, with one describing the April rate cut as “pre-emptive” and calling for a more calibrated approach, others were open to further easing in the coming months, she said. The overall picture, Rao said, suggests that further action is likely if inflation remains in check and growth stays subdued.
Market sentiment, according to her, aligns with this view. “Markets are currently pricing in the likelihood of at least two more rate cuts within the coming year,” she said, indicating that investor expectations are now firmly tilted towards a continued easing cycle.
The RBI’s latest minutes confirm a shift in focus towards supporting growth, with inflation stabilising around the 4 per cent target. The MPC, led by Governor Sanjay Malhotra, unanimously agreed to cut the policy repo rate by 25 basis points to 6 per cent in its April meeting.
Malhotra said the easing move was aimed at boosting private consumption and supporting a revival in corporate investment amid a turbulent global environment. “Going forward too, considering the evolving growth-inflation trajectories, monetary policy needs to be accommodative,” he said.
