RBI May Announce Rate Cut by February 2025, Says SBI Research
New Delhi, India – The Reserve Bank of India (RBI) might announce a rate cut by February 2025, following a recent 50 basis points rate cut by the US Federal Reserve, according to a report by SBI Research.
The report highlighted that India’s consumer price index (CPI) inflation has eased to a near five-year low of 3.65% year-on-year in August 2024. Despite expected inflation spikes in September and October, CPI inflation is projected to stay below or close to 5% in the coming months.
For the full financial year 2024-25, average inflation is expected to be in the range of 4.6% to 4.7%, staying within the RBI’s target range of 4-6%. The report also noted that monsoon activity has been favorable, with a 7% surplus recorded so far. This has positively impacted Kharif sowing, which has reached 109.7 million hectares, surpassing the five-year average.
As of September 17, Kharif crop sowing was 0.1% higher than the typical acreage and 2.2% higher than last year. Paddy sowing, in particular, saw a 2.1% increase, reaching 41 million hectares compared to the five-year average.
In terms of monetary policy, the RBI has continued to maintain tight liquidity to manage inflationary pressures. Government surplus cash balances averaged Rs 2.8 lakh crore, while the durable/core liquidity surplus increased to Rs 3.19 lakh crore as of September 18, with an average of Rs 3.9 lakh crore since the last monetary policy announcement.
Considering these factors, the report added that if inflation continues to stay within the RBI’s target range, a rate cut announcement could be made by February next year.
Doubts Revealed
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India, which means it controls the money supply and interest rates in the country.
Rate Cut -: A rate cut means the central bank (RBI) lowers the interest rates. This can make borrowing money cheaper and can help boost the economy.
SBI Research -: SBI Research is the research division of the State Bank of India (SBI), which is the largest bank in India. They study and predict economic trends.
US Federal Reserve -: The US Federal Reserve is the central bank of the United States. It controls the money supply and interest rates in the US, similar to what RBI does in India.
Basis Points -: Basis points are a way to describe changes in interest rates. One basis point is equal to 0.01%. So, 50 basis points mean a 0.50% change.
Consumer Price Index (CPI) Inflation -: CPI inflation measures how much the prices of everyday items like food and clothes have increased over time. It helps us understand how expensive things are getting.
Kharif Sowing -: Kharif sowing refers to planting crops during the monsoon season in India, usually from June to October. Common Kharif crops include rice, maize, and cotton.
