RBI Policy: Economists expect a shallow rate cut cycle to begin in H2FY25

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Read RBI Monetary Policy 2024 LIVE Updates here Under these circumstances, monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission of the past actions, he added. Economists believe that the RBI now seems to remain more confident of growth conditions than that with inflation trajectory.

However, they expect a shallow rate cut cycle to begin only in the second half of FY25. “With an unchanged inflation projection for FY25 at 4.5%, with growth conditions improving and with the US Federal Reserve also pushing out its rate cut cycle, we think that the RBI might only be in a position to cut rates either in the August policy or even later.

While one can remain confused on the timing of the cut, the confidence is on the fact that the rate cutting cycle in India will be shallow in FY25," said Indranil Pan, Chief Economist at Yes Bank. Also Read: RBI monetary policy: Rates remain unchanged, growth outlook bright; 5 key highlights of RBI MPC outcome Madhavi Arora, Lead Economist, Emkay Global Financial Services has long maintained that the RBI policy has been somewhat pegged to the Fed, specifically over the last two years, even as it formally targeted inflation.

“This seems fair, as external dynamics have been fluid, implying that the policy prerogative needs to be flexible for ensuring financial stability. The fluidity of global narratives and policy repricing, in conjunction with the near-term problem-of-plenty on INR/bonds, could make it arduous for the RBI to find a balance in its policy biases," said Arora.