By Anant Chandak
According to a recent Multibagger poll, the Reserve Bank of India (RBI) is expected to cut interest rates by a modest 50 basis points over the next six months. Most economists believe that the RBI will wait until December to make the move, rather than acting in October.
Inflation in India has remained below the RBI's target of 4.0% for the past two months. While there may be a slight increase in the coming months, it is expected to stay within the 2%-6% comfort zone for the foreseeable future.
Despite the recent 50 basis-point cut by the U.S. Federal Reserve, economists do not expect the RBI to follow suit immediately. This is due to the strength of the domestic economy and the stability of the Indian currency.
The majority of economists surveyed believe that the RBI will maintain the current repo rate of 6.50% at its upcoming meeting in October. However, there are some who anticipate a 25 basis-point cut, while one economist predicts a drop to 6.15%.
Looking ahead, the RBI is expected to cut rates further in December, as the Indian economy continues to show strength. Governor Shaktikanta Das has emphasized the importance of not overreacting to temporary dips in inflation, indicating that the central bank will wait for more benign inflation readings before making any moves.
Overall, the poll forecasts a quarter-point cut in the next quarter, with rates expected to reach 6.25%. By the end of the year, economists predict a repo rate of 6.00%, slower than the expected cuts by the Federal Reserve.
Despite some uncertainties, the Indian economy is projected to grow by 6.9% this fiscal year, making it the fastest-growing major economy in Asia.
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Analysis: The RBI's potential interest rate cuts can have significant implications for individuals and businesses in India. Lower interest rates can make borrowing cheaper, stimulate spending, and boost economic growth. However, it can also lead to lower returns on savings and investments. It is important for individuals to stay informed about these developments to make well-informed financial decisions.