RBI Poised for Strategic Rate Cuts Amid Growth Concerns

Deutsche Bank suggests the Reserve Bank of India should initiate a rate cut cycle with a 0.25% reduction in key rates by February 2025. Delaying could risk falling behind and sacrificing growth. Analysts expect cuts in February and April, with the repo rate potentially reaching 6% by mid-2025.

Deutsche Bank has urged the Reserve Bank of India to kick off a rate cut cycle with a 0.25% reduction in key rates at the February policy review. The bank's analysts argue that any delay in rate cuts could hinder economic growth, warning that the RBI risks falling behind globally if it hesitates too long.

According to Deutsche Bank, the RBI should implement a 0.25% rate cut in both February and April 2025, possibly lowering the repo rate to 6% by mid-year. The bank emphasizes the importance of early action due to the lag in monetary transmission, which in India can span at least three quarters.

The analysts highlight that under former Governor Shaktikanta Das, the RBI maintained rates for 11 policy reviews despite declining growth. As Sanjay Malhotra prepares for his first policy review in February, all eyes are on the RBI's next move, particularly after the longest pause before rate cuts in its history.

(With inputs from agencies.)