“RBI Policy Meeting Commences: SBI Forecasts Rate Cut Delayed Until Q3FY25; Insights Revealed”

The Reserve Bank of India (RBI) is anticipated to postpone rate cuts until the third quarter of fiscal year 2025 (Q3FY25), as indicated by a recent report from SBI Research.

The report suggests that historical trends demonstrate a lag of two months in emerging economies’ interest rate adjustments following rate changes in developed economies such as the US and the UK.

SBI Research emphasizes that India tends to deviate from this trend, with the first rate cut projected for Q3FY25, although the subsequent rate-cut cycle may be modest.

The Monetary Policy Committee (MPC) of the RBI is scheduled to convene for a three-day meeting beginning April 3 and concluding on April 5. SBI anticipates that the transition toward rate cuts may be protracted, reflecting recent statements from Federal Reserve Chair Powell regarding the importance of further progress in addressing inflation concerns.

SBI notes that current domestic inflation is primarily influenced by food prices, with fuel prices remaining stable. This trend is anticipated to persist, with food prices continuing to drive domestic inflation dynamics.

The bank projects CPI inflation to hover slightly above 5 percent for the remainder of FY24, with core CPI reaching a 52-month low of 3.37 percent.

Looking ahead, SBI forecasts a decline in inflation until July 2024, followed by an uptick to a peak of 5.4 percent in September 2024, before decelerating. For FY25 as a whole, CPI inflation is expected to average 4.5 percent, down from 5.4 percent in FY24.