RBI likely to cut interest rates by 25 bps on April 9: Experts

RBI likely to cut interest rates by 25 bps amid global challenges, aiming to boost growth and consumption.

The Reserve Bank of India (RBI) is likely to cut key interest rates again by up to 25 basis points this week, as lower inflation provides support for an accommodative monetary policy stance, and there is a pressing need to stimulate growth at a time when the reciprocal tariffs announced by the U.S. is posing a challenge to the global economy.

In February, the RBI’s Monetary Policy Committee, headed by Governor Sanjay Malhotra, slashed the repo rate by 25 basis points to 6.25%. It was the first reduction since May 2020 and the first revision after two-and-a-half years.

The 54th meeting of the MPC, the rate-setting panel, is scheduled to start deliberations on April 7, and the decision will be announced on April 9, 2025.

The RBI has kept the repo rate (short-term lending rate) unchanged at 6.5% since February 2023. The last time the RBI reduced the rate was during the Covid times (May 2020), and thereafter, it was gradually raised to 6.5%.

Bank of Baroda Chief Economist Madan Sabnavis said the credit policy to be announced this week will come at a time when several things are happening around the world and within the economy.

The new round of tariffs imposed by the U.S. would have some impact on growth prospects and the currency which is something that the MPC will have to consider beyond the normal assessment of the state of the economy, he said.

"While it does look like conditions are rather clear for another 25 bps cut in repo rate this time with the inflation prospects being benign and liquidity having settled down, it is also expected that the stance will change to accommodative, meaning...that there could be more rate cuts in the offing during the course of the year," Sabnavis said.