Summary:

As inflation approaches 4%, India's central bank is anticipated to embark on a monetary easing cycle, potentially lowering interest rates by 100 basis points starting in December. Mr. Vikas Jain of Bank of America India stated that the repo rate might decrease to 5.50%. An initial 25 basis point cut is expected in December, with a total reduction of 100 basis points by March 2026.

The central bank, meeting this week, is set to maintain the benchmark repo rate at 6.50% for the ninth consecutive time. Retail inflation in India rose to 5.08% in June, while core inflation fell to 3.1%, nearing a record low. The Reserve Bank of India forecasts average inflation of around 4.5% for the fiscal year ending in March. The central bank recently revised its neutral rate estimate to 1.4%-1.9%, up from 0.8%-1.0%. This broader range suggests potential further rate cuts. The 10year benchmark bond yield is expected to fall to 6.70% by December.

Source: IBEF 

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