RBI to slash interest rates on April 9, once more in August in shortest easing cycle on record: Report

The Reserve Bank of India (RBI) will cut interest rates at a second straight meeting on April 9, with just one more cut expected in August, which would mark the shortest easing cycle on record, a Reuters poll of economists found.

With inflation in India easing to a seven-month low of 3.61 per cent in February and the economy forecast to grow at 6.4 per cent this fiscal year, the weakest in four years, the central bank has room to cut rates further.

A strong majority of economists, 54 of 60 in the March 18-27 Reuters poll, expected the RBI to cut its benchmark repo rate by 25 basis points to six per cent at the conclusion of its April 7-9 meeting. One respondent predicted a 50 basis point cut, while the remaining five expected no change.

Also Read: RBI may cut repo rate by 25 bps in April; total 75 bps reduction likely in FY26: Ind-Ra

"They have injected liquidity, so that's covering some part of the liquidity deficit, that's good. But I think the rates also need to fall now because we have seen a palpable slowdown in consumption and investment and the real rates need to adjust from that perspective."

The RBI has injected about $64 billion of rupees into the banking system over the last few months to increase money supply, which economists said was needed for rate cuts to work their way into the broader economy.

However, several economists in the poll said it would take a few more months for that to happen. "If transmission needs to happen, especially in a rate-cutting cycle, (banking sector) liquidity needs to be on the positive side," said Indranil Pan, chief economist at Yes Bank.

Also Read: RBI releases MPC schedule for FY26, first policy meeting to be held between April 7-9; Check full list

Shallowest rate-cut cycle ever

Median forecasts in the Reuters poll showed the RBI will keep interest rates at six per cent in the June 4-6 meeting. However, a narrow majority of economists, 29 of 49, expected the interest rate to fall to 5.75 per cent in the August meeting, a view unchanged from last month.

This is expected to be followed by a prolonged pause until at least the first half of next year. With 75 basis points in rate cuts, this cycle will be the shortest easing cycle since early 2000, when the RBI began using the repo rate as its main policy tool.

"I think this will be a shallow rate cut cycle to begin with...Depending on what happens on the global front, drags of capital outflows and what the US Fed does," said Sakshi Gupta, principal economist at HDFC bank. "We were always of the view that there will be a maximum of three rate cuts that the RBI will deliver...Beyond the cut in April, we remain divided between June and August."

Also Read: RBI Monetary Policy: Is the rate cut a growth pill to boost demand? Here’s what it means for the Indian economy