RBI Poised for Repo Rate Cut: Jefferies Report Highlights Monetary Policy Shift

According to Jefferies, the Reserve Bank of India might cut the repo rate by 25 basis points this year, amounting to a total reduction of one percentage point. This change is in line with a shift from a steady monetary policy. RBI's target inflation rate is influenced by food prices.

In a significant shift from its steady monetary policy, the Reserve Bank of India (RBI) is set to reduce the repo rate by 25 basis points this year, potentially culminating in a total cut of one percentage point, according to a report by investment bank Jefferies.

Jefferies' India office forecasts a modest 25 basis points rate cut in 2023 to 6.25%, and anticipates a cumulative 100 basis points reduction in the upcoming easing cycle. The next RBI monetary policy review will be held from October 7-9, marking a possible end to the nine consecutive meetings with steady rates.

Despite a formal inflation target focused on headline CPI, influenced heavily by food prices beyond RBI's control, the central bank aims for a 4.5% Consumer Price Index by the end of March 2025, slightly above their official 4% target. The recent US Federal Reserve's monetary easing signals a global trend, with RBI potentially following suit amid inflation challenges.

(With inputs from agencies.)