Narrow majority of economists predict RBI likely to cut rates to 6.25% in December: Reuters poll

This anticipated rate cut comes alongside predictions that inflation will ease in the near term.

Inflation, which unexpectedly rose to 5.49 percent in September, is projected to decline to an average of 4.9 percent for the current quarter and further drop to 4.6 percent in the January-March period.

This cooling inflation trend is likely to provide the RBI with more flexibility to lower rates.

The central bank has maintained its key interest rates at their highest levels since early 2019 for 10 consecutive meetings.

However, RBI Governor Shaktikanta Das recently noted that the balance between inflation and economic growth was "well-poised" and projected inflation to moderate in the upcoming quarter.

Following a shift to a 'neutral' policy stance earlier this month and in light of a slight slowdown in growth expectations, the balance has tipped slightly towards a rate cut.

Out of the 57 economists surveyed by Reuters between October 21 and 29, 30 predicted a 25 basis point cut at the December 4-6 meeting, while 27 forecast no change.

Despite remaining the fastest-growing major economy, India’s growth is forecast to slow to 6.9 percent in the current fiscal year and 6.7 percent in the next, down from 8.2 percent in 2023-24.

These estimates are below the RBI's projections of 7.2 percent and 7.1 percent, respectively.

However, with inflation expected to remain above the central bank's medium-term target of 4 percent until early 2026, there is limited scope for further substantial rate cuts.

The poll's median forecasts suggest the RBI will cut rates only once more after December, with a majority of those who anticipate a December move predicting an additional cut in February.

Nevertheless, no clear majority emerged for another 25 basis point cut in the April-June period, and this expectation was based on a smaller sample size of economists.

In contrast, major central banks like the US Federal Reserve and the European Central Bank have already implemented at least 50 basis points worth of cuts.

For the RBI’s Monetary Policy Committee (MPC), there is still uncertainty about whether it will deliver its initial rate cut in December.