New Delhi: A report from SBI Research indicates that as inflation reaches a multi-year low and expectations remain muted, the Reserve Bank of India (RBI) may implement a 50 basis point rate cut in June and August.
The analysis also points out that total rate reductions could surpass 100 basis points due to rising concerns about an increasingly unpredictable economic landscape.
The report projects GDP growth for the financial year 2026 (FY26) at 6.3 percent, with a downward trend anticipated.
"Given the multi-year low inflation this month and favorable inflation expectations ahead, we foresee rate cuts of 50 basis points in both June and August. We believe the total rate cuts could exceed 100 basis points in light of the uncertain growth environment. Our GDP growth forecast for FY26 stands at 6.3 percent, with a downward bias," the report states.
On April 9, the RBI's Monetary Policy Committee (MPC) announced a 25-basis-point reduction in the repo rate, lowering it from 6.25 percent to 6 percent.
This decision marks the second consecutive rate cut in recent months, following a reduction from 6.5 percent to 6.25 percent on February 7.
Cuts in policy interest rates are designed to bolster economic growth and improve both affordability and loan eligibility.
Following its MPC meeting, the Reserve Bank of India projected an inflation rate of 4 percent, highlighting significant improvements in the food sector outlook.
Recent inflation figures released on April 15 indicate a decrease in inflation rates for March, a trend anticipated to persist in the upcoming months.
In March 2025, the Consumer Price Index (CPI) inflation fell to 3.34 percent, marking a 67-month low, primarily due to a significant drop in food inflation.
According to a report from SBI Research, the average CPI inflation for the financial year 2026 is projected to be around 3.9 percent.
Inflation in food and beverages decreased by 95 basis points month-over-month to 2.88 percent in March, largely attributed to falling vegetable prices.
The core CPI inflation rate was recorded at 4.0 percent in March, down from 4.1 percent in February, as per the data.
For March, rural CPI inflation was reported at 3.25 percent, slightly lower than the 3.29 percent recorded in the previous month. In contrast, urban CPI inflation for March rose to 3.43 percent from 3.32 percent in February, according to the data.
