Active Stocks
Mon Apr 22 2024 15:07:01
  1. Tata Steel share price
  2. 162.05 -0.03%
  1. HDFC Bank share price
  2. 1,511.90 -1.27%
  1. State Bank Of India share price
  2. 764.85 1.87%
  1. ICICI Bank share price
  2. 1,087.35 1.96%
  1. Wipro share price
  2. 461.75 1.97%
Business News/ Economy / RBI policy meet starts tomorrow: SBI says there could be no rate cut before Q3FY25; here's why
BackBack

RBI policy meet starts tomorrow: SBI says there could be no rate cut before Q3FY25; here's why

RBI policy meet starts tomorrow: The Reserve Bank of India (RBI) might only consider cutting rates in the third quarter of the fiscal year 2025 (Q3FY25), as per a report from SBI Research.

RBI policy meet starts tomorrow: SBI believes that the RBI can only cut rates after the developed economies do so. Photographer: Dhiraj Singh/Bloomberg (Bloomberg)Premium
RBI policy meet starts tomorrow: SBI believes that the RBI can only cut rates after the developed economies do so. Photographer: Dhiraj Singh/Bloomberg (Bloomberg)

RBI policy meet starts tomorrow: The Reserve Bank of India (RBI) might only consider cutting rates in the third quarter of fiscal year 2025 (Q3FY25), as historical trends suggest that interest rates in emerging economies change with a lag of two months in response to rate changes in developed economies like the US and the UK, according to a report by SBI Research.

SBI believes the RBI will maintain the policy stance as 'withdrawal of accommodation' and the first rate cut will occur in Q3FY25. Moreover, the rate-cut cycle could be shallow.

However, SBI Research underscored that India is a "notable exception to strong evidence of emerging economy central bank rate actions being predicated by advanced economy central bank rate actions".

"We believe the stance should continue to be withdrawal of accommodation. Strong evidence of emerging economy central bank rate actions is predicated by advanced economy central bank rate action. India is an exception. The first RBI cut is possible in Q3FY25. Rate cut cycle likely to be shallow," said SBI.

The Monetary Policy Committee (MPC) of the RBI will convene for a three-day meeting starting on April 3 and concluding on April 5.

Also Read: RBI policy meet starts on April 3: Status quo on rates, change in stance possible? Here's what top experts say

SBI believes the pivot on rate cuts can be a long and enduring journey for markets.

"Federal Reserve chair Powell put some ice on the broader market’s hopes of an early pivot by decisively speaking that the Fed would like to see more progress on the price front despite a favourable PCE reading. PCE, which strips volatile food and energy prices, rose 0.3 per cent in February, after rising 0.5 per cent in January, marking its biggest back-to-back gain in a year time," SBI observed.

Also Read: RBI Monetary Policy Committee Meeting this week: Date, time and what to expect

The bank said domestic inflation is currently being driven by food price dynamics as fuel prices remain moderate. The trend is likely to continue and evolving food prices may continue determining domestic inflation.

CPI inflation is expected to remain slightly above 5 per cent in the remaining month of FY24. Core CPI declined to 3.37 per cent - a 52-month low, SBI underscored.

Also Read: RBI likely to keep interest rates unchanged in upcoming April, June policy meetings: Report

"Inflation is expected to decline till Jul’24 but increase thereafter to reach a peak of 5.4 per cent in Sep’24, followed by a deceleration. For the whole FY25, CPI inflation is likely to average 4.5 per cent against 5.4 per cent in FY24," said SBI.

Read all economy-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 02 Apr 2024, 11:02 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App