CRISIL Predicts RBI Repo Rate Cut of 50-75 Basis Points in FY26
CRISIL, a prominent credit rating agency, has projected that the Reserve Bank of India (RBI) may reduce the repo rate by 50 to 75 basis points (bps) during the fiscal year 2025-26 (FY26). This anticipated monetary easing aims to stimulate consumption and lower borrowing costs, thereby supporting economic growth.
Anticipated Repo Rate Reduction
The forecasted reduction in the repo rate by 50-75 bps is expected to make borrowing more affordable for both consumers and businesses. This monetary policy adjustment is anticipated to encourage higher spending and investment, contributing to economic expansion.
Economic Growth Projections
CRISIL maintains a positive outlook on India’s economic trajectory, projecting a Gross Domestic Product (GDP) growth rate of 6.5% for FY26. This estimate aligns closely with the pre-pandemic decadal average of 6.6%, suggesting a steady recovery and reinforcing India’s position as one of the fastest-growing major economies.
Factors Influencing Monetary Policy
Several key factors are influencing the RBI’s monetary policy considerations:
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Inflation Trends: The RBI has projected Consumer Price Index (CPI) inflation to moderate to 4.2% in FY26, providing room for potential rate cuts.
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Fiscal Policies: The government’s focus on fiscal prudence and asset-building initiatives is expected to support sustainable economic growth, complementing the RBI’s monetary stance.
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Global Economic Conditions: Global trade uncertainties and geopolitical tensions are being closely monitored, as they could impact domestic economic stability and influence monetary policy decisions.
Recent Monetary Policy Actions
In a recent development, the RBI’s Monetary Policy Committee (MPC) reduced the repo rate by 25 bps to 6.25%, marking the first rate cut in nearly five years. This move reflects the central bank’s commitment to supporting economic growth while maintaining price stability.
Outlook for Borrowing Costs and Consumption
The anticipated reduction in the repo rate is expected to lower borrowing costs, thereby stimulating consumption and investment. This monetary easing aligns with the government’s efforts to boost economic activity and achieve higher growth rates in the coming fiscal years.
In conclusion, CRISIL’s projection of a 50-75 bps cut in the RBI’s repo rate for FY26 underscores a strategic approach to fostering economic growth through accommodative monetary policy. By reducing borrowing costs and encouraging consumption, these measures aim to sustain India’s robust economic momentum in the face of global uncertainties.
