RBI monetary policy decision: Is an RBI rate cut coming after Union Budget 2025? What experts suggest

RBI Monetary Policy: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on December 6 announced that it would maintain the repo rate at 6.5 per cent for the eleventh consecutive time, in line with market expectations. In a key development, the MPC unanimously agreed to reduce the Cash Reserve Ratio (CRR) by 50 basis points to 4 per cent, a move aimed at injecting liquidity into the banking system.

The RBI MPC retained its 'Neutral' policy stance, reflecting a cautious approach to current economic conditions. This stance was introduced during the October policy review, marking a shift from the earlier 'Withdrawal of Accommodation.' 

RBI Governor Shaktikanta Das stated that four out of six members voted in favour of maintaining the current rate, with the committee also deciding to keep the standing deposit facility (SDF) rate at 6.25 per cent and the marginal standing facility (MSF) rate and bank rate at 6.75 per cent.

“Our effort is to follow the flexible inflation target,” said Reserve Bank of India (RBI) Governor Shaktikanta Das. He emphasised the central bank’s commitment to maintaining a balance between inflation control and economic growth. Das stated that the central bank's mandate is to ensure price stability, while also focusing on the goal of sustaining economic growth.

Growth, Inflation Projections Revised

The central bank also made some changes to its growth and inflation projections. RBI cut its GDP growth forecast for FY25 to 6.6 per cent (7.2 per cent earlier) and raised its inflation projection for FY25 to 4.8 per cent (4.5 per cent earlier). Das also emphasised that the RBI will stay "watchful" of global and domestic conditions as the economic landscape continues to evolve.

Expert Opinion on RBI’s Policy Decision

Below are key insights from industry professionals on what today's policy decision means for the Indian economy and financial markets.

Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers

Hajra expressed some scepticism over the RBI's GDP growth forecast reduction from 7.2 per cent to 6.6 per cent for FY25. He pointed out that this cut conflicts with expectations of stronger economic momentum in the year's latter half. While he maintained his own FY25 growth projection at 7 per cent, Hajra opined that the RBI's CRR cut is aimed at easing liquidity and lowering money market rates. He expects the rate-easing cycle to commence in April 2025 rather than February.

Dhawal Dalal, President & CIO-Fixed Income, Edelweiss Mutual Fund

Dalal highlighted the balance between caution and practicality in the MPC’s decision-making. He noted that the CRR reduction addresses liquidity deficits in the banking system, particularly for December. Dalal foresees the first rate cut materialising in February 2025 as food inflation eases.

Mohit Batra, Founder & CEO, Markets Mojo

Batra emphasised the dual challenges facing India—higher inflation and slowing growth. He stated that the revised GDP growth and inflation projections underscore the need to revive consumption without exacerbating inflationary pressures. Batra argued that the RBI and the finance ministry must collaborate to address these issues, with any rate cuts likely only after the Union Budget 2025.

Yes Securities

Yes Securities predicted a modest reduction in the repo rate beginning February 2025, contingent on inflation softening in Q4 FY25. The brokerage expects a cumulative rate cut of 50-75 basis points for 2025, though it acknowledged global uncertainties such as geopolitical risks and foreign exchange volatility as potential challenges.

Rajeev Radhakrishnan, CIO - Fixed Income, SBI Mutual Fund

Radhakrishnan noted that the CRR cut signals the RBI’s intention to address core liquidity constraints while maintaining a cautious policy stance. He believes the February 2025 review could lead to a rate cut, provided there are no inflation shocks. He also suggested that additional liquidity measures, such as repo auctions, may follow if needed.

Suresh Darak, Founder, Bondbazaar

Darak pointed out that the RBI's unchanged repo rate decision aligns with recent inflation trends, which stood at 6.21 per cent in October. He observed that bond markets had largely anticipated this outcome. Looking ahead, Darak expects a rate cut in early 2025 to boost economic growth, contingent on cooling inflation.

Divam Sharma, Founder and Fund Manager, Green Portfolio

Sharma characterised the current economic environment as tricky, with subdued consumption and elevated inflation complicating policy decisions. While he welcomed the CRR cut for its positive liquidity impact, he suggested that rate cuts in 2025 might not exceed 50 basis points. 

Anil Rego, Founder and Fund Manager, Right Horizons PMS

Rego highlighted the potential economic stimulus stemming from the CRR reduction, which could inject approximately ₹1.1-1.2 lakh crore into the financial system. He noted that this move would likely benefit banks by enhancing net interest margins and fostering credit growth. Rego anticipates rate cuts at the end of FY25 or early FY26, with credit-sensitive sectors like auto and real estate poised to benefit.

Jigar Trivedi, Senior Analyst, Reliance Securities

Trivedi emphasised the MPC’s focus on durable price stability as the foundation for sustained growth. He noted that while inflation remains above the RBI’s 4 per cent target, economic growth has slowed to 5.4 per cent in Q2 FY25. Trivedi expects the central bank to initiate rate cuts in February 2025, aligning with inflationary and growth trends.

The RBI’s latest policy decision reflects a cautious yet responsive approach to evolving economic conditions. While the unchanged repo rate signals prudence in addressing inflationary pressures, the CRR cut demonstrates a commitment to fostering liquidity and supporting growth. Experts agree that the groundwork for rate cuts has been laid, with February 2025 emerging as a potential turning point. As the central bank navigates this complex landscape, its balanced and proactive stance offers hope for a stable and resilient financial system.

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