The Reserve Bank of India may consider further monetary easing. This possibility hinges on global challenges impacting domestic growth. A recent report from CareEdge Ratings highlights this cautious stance.
After a 25 basis-point rate cut in December, the central bank is watching closely. The domestic economy performed relatively well in the first half of the year. Inflationary pressures have also remained benign.
This environment gave the RBI comfort to stimulate growth. The policy repo rate was reduced to support momentum. Yet, future support may be needed as certain growth drivers fade.
Early festive season boosts and export front-loading supported H1 growth. These factors are expected to gradually lose steam. External conditions add another layer of complexity.
Exports are facing pressure from high US tariffs. Global headwinds pose a significant risk. If these severely weigh on growth prospects, the RBI could act.
The report notes limited room for further fiscal stimulus. The government has already provided support through GST rationalisation. Lower income tax burdens also offered a boost.
With fiscal space constrained, monetary policy may take the lead. The responsibility could shift if growth conditions deteriorate. The RBI is likely to keep its options open.
There is scope for another 25 basis-point cut based on inflation. However, the Monetary Policy Committee may choose to pause. Preserving policy space is seen as critical.
Maintaining this ‘fire power’ is a priority. Fiscal consolidation limits further government stimulus. The existing measures have already been deployed.
Risks from a global slowdown and trade pressures persist. The RBI is expected to adopt a cautious approach. The door remains open for future rate cuts if needed.
The December meeting saw the repo rate cut to 5.25 percent. This rate influences what banks pay to borrow from the RBI. The cut aims to boost liquidity and support economic growth.
Other key rates were also outlined. The Standing Deposit Facility Rate stands at 5.00 percent. The Marginal Standing Facility Rate is at 5.50 percent.
The Bank Rate is also 5.50 percent, acting as a benchmark. The Fixed Reverse Repo Rate remains at 3.35 percent. Together, these tools guide liquidity and financial stability.
The RBI’s framework is designed to manage inflation and growth. Current conditions allow for a watchful stance. Future decisions will depend on how global challenges unfold.
Growth momentum in the coming months is a key focus. The central bank stands ready to intervene. Its cautious approach balances current stability with future risks.