There is strong expectation that the RBI may cut lending rates again in April 2025, especially as inflation has cooled to a five-month low of 4.31% in January. Analysts predict a cut of 25 to 50 basis points, driven by concerns over slowing economic growth and easing inflation pressures.
RBI’s Potential Rate Cut in April 2025
The Reserve Bank of India (RBI) is likely to implement another cut in lending rates during its upcoming Monetary Policy Committee (MPC) meeting in April 2025. The recent decline in inflation, which fell from 5.22% in December 2024 to 4.31% in January 2025, supports this expectation. Many analysts believe the RBI will act to bolster the economy.
Key Factors Influencing the Rate Cut:
- Economic Growth Concerns: The MPC has expressed worries about slowing GDP growth, prompting discussions on the need for easier monetary policy.
- Inflation Trends: Recent data shows a downward trend in inflation, mainly due to lower food prices, creating a favorable environment for a rate cut.
Analyst Predictions and Market Reactions
Financial institutions and analysts forecast a rate cut of 25 to 50 basis points. Kotak Mahindra Bank emphasizes the need for a cut to complement tax reductions in the FY2026 Union Budget, noting that all MPC members agree on this urgency.
- Gradual Rate-Cutting Cycle: Most analysts expect the RBI to take a gradual approach, implementing small reductions over time.
- Diverse Opinions: Some analysts predict a conservative approach, while others, like Nomura Holdings, foresee a more substantial cut of up to 75 basis points by the end of 2025.
In summary, easing inflation and economic growth concerns position the RBI to consider further rate cuts soon, with April 2025 being a critical timeframe for these decisions.
