RBI Primed for Possible Interest Rate Cuts by October: Crisil

The Reserve Bank of India (RBI) might lower interest rates by October, according to Crisil, provided external factors remain stable. They foresee two fiscal rate cuts, with the recent rate hold influenced by food inflation. Prospects of a better macroeconomic environment could pave the way for cuts.

The Reserve Bank of India (RBI) may lower interest rates around October if external conditions remain favorable, according to a report by credit rating agency Crisil. The agency anticipates two rate cuts this fiscal year, with the Monetary Policy Committee's recent decision to maintain rates driven by high food inflation. Changing weather conditions also play a crucial role in their projections.

Looking ahead, Crisil forecasts an improved macroeconomic environment will set the stage for a rate cut. "The food inflation challenge is expected to lessen as agricultural prospects improve. With monsoon rains above normal and increased sowing of major food grains, a clearer agricultural outlook by September could pave the way for a rate cut," the report stated.

The RBI has kept the repo rate unchanged at 6.5 percent amid ongoing inflation concerns. Crisil highlighted factors like international freight costs, crude oil price risks, and domestic telecom tariff hikes as potential pressures on core inflation. Despite these challenges, the RBI remains focused on maintaining inflation within its target while supporting economic growth and job creation.

(With inputs from agencies.)