Dec 5 (Reuters) – The Reserve Bank of India (RBI) cut its key repo rate by 25 basis points on Friday and took steps to boost banking-sector liquidity by up to $16 billion to support a “goldilocks economy”.
The six-member monetary policy committee voted unanimously to lower the repo rate to 5.25%, in line with a consensus view, and maintained a “neutral” stance, suggesting room for further rate cuts.
COMMENTARY:
SAMANTAK DAS, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR FOR RESEARCH AND REIS, JLL INDIA
“This move is the catalyst needed to revive purchasing power and activate the crucial segment of first-time affordable and mid-market home-buyers who have been waiting on the sidelines, transforming fence-sitters into active buyers.”
SUJAN HAJRA, CHIEF ECONOMIST & EXECUTIVE DIRECTOR, ANAND RATHI GROUP, MUMBAI
“Alongside the rate cut, the RBI announced open market purchases of government bonds and swap transactions, signalling a clear easing bias.”
“The key driver behind the policy shift, despite strong macro fundamentals, is the sustained downside surprise in inflation prints.”
“If inflation continues to trend below the projected path, the possibility of another 25 bps cut cannot be dismissed.”
DHIRAJ NIM, ECONOMIST AND FX STRATEGIST, ANZ, MUMBAI
“We believe this could be the last rate cut of this cycle. From here on, RBI will mostly support via liquidity.”
“Rupee remains steady, (and) is unlikely to face pressure because of (Friday’s) rate cut, especially as expectations of a December Fed rate cut have also increased.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“As we expected, the RBI delivered a rate cut recognising the impending risks to growth and utilising the monetary space yielded by low inflation.”
“The central bank aptly took a forward-looking view on growth and inflation as the latter is expected to remain below 4% up till the second quarter of FY27.”
“We keep our forecasts unchanged, projecting GDP growth at 7.3% for FY26 and inflation at 2%. For FY27, we expect GDP growth at 6.5% and inflation at 4%.”
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“Surprisingly lower inflation prompted the RBI to announce a 25-bps rate cut, as widely expected, given its outlook for markedly slower growth during the second half of FY26.”
“Adding to this are concerns over the external sector, lack of visibility around the Indo-US trade deal, and multiple high-frequency indicators already signaling a slowdown in activity despite the prevailing narrative of a demand surge following the GST rate cut.”
“These factors suggest the possibility of an additional rate cut going forward.”
MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI
“With inflation persistently undershooting, the RBI found it harder to ignore its core mandate of inflation management and decided to cut by 25bps.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The RBI delivered on most fronts on Friday, lowering rates along our expectations and taking pro-liquidity steps, as well as moves to prevent re-hardening in borrowing costs.”
“The policy decision was likely dictated by a higher weightage to below-target inflation, which had provided a sizeable real rate buffer.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“We believe that there would be scope for another 25 bps cut this cycle as inflation is expected to remain benign, and despite high real GDP print, there are no signs of over-heating in the economy.”
TERESA JOHN, LEAD ECONOMIST, NIRMAL BANG, MUMBAI
“The 25bps rate cut, along with liquidity measures, will help keep bond yields in check and help sustain the momentum in the economy.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The repo rate cut, along with liquidity easing measures, announced by the RBI is exactly in line with our expectations.”
“With RBI continuing to leave room open for further easing, we do not rule out another 25bps cut, with the likely terminal rate at 5% followed by a prolonged pause.”
(Reporting by Manvi Pant, Ananta Agarwal, Meenakshi Maidas Kashish Tandon, Nishit Navin, Hritam Mukherjee, Anuran Sadhu, Urvi Dugar and Bharath Rajeswaran in Bengaluru; compiled by Dhanya Skariachan, Editing by Harikrishnan Nair)
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