Udaipur, February 7 – The Reserve Bank of India (RBI) is expected to extend its rate cutswith an additional 25 basis points (bps) reduction likely in Aprilaccording to HDFC Bank Principal Economist Sakshi Gupta. She emphasized that the extent of future rate cuts will depend on domestic and global economic conditions.

RBI’s Shift Towards Growth: A Key Decision

The RBI’s Monetary Policy Committee (MPC) cut the policy rate by 25bpsshifting its focus towards supporting economic growth.
RBI Governor highlighted the “flexibility” in the inflation target frameworkmoving away from the earlier goal of reaching the 4% median target.
While interest rates were reduced, the MPC maintained its neutral stancesignaling a cautious approach to further rate cuts.

Liquidity Management: Balancing Growth and Stability

Despite the rate cut, the RBI refrained from a major liquidity infusionensuring measured monetary support.
Liquidity conditions may remain tight due to advance tax outflows and year-end financial settlements.
The RBI is expected to address liquidity challenges through Open Market Operations (OMOs), buy/sell swaps, and longer-duration repos.

Inflation & Growth Projections for FY26

Inflation rate expected to average at 4.2% in FY26reflecting RBI’s confidence in the disinflation process.
GDP growth projected at 6.7%aligning with the upper range of India’s economic survey forecast (6.3%-6.8%).
RBI continues to take a balanced regulatory approachthough clarity is still awaited on the implementation of new Liquidity Coverage Ratio (LCR) norms.

What’s Next? More Rate Cuts Ahead?

Sakshi Gupta predicts that the RBI will frontload its rate cutsmaking another 25bps reduction in April’s policy review. However, the scope for further rate cuts will depend on evolving domestic and global economic conditions.

The RBI’s balanced approach to growth and inflation control suggests that while monetary easing will continueit will be cautiously managed to avoid excessive liquidity expansion.

Final Thoughts: A Strategic Move for Economic Growth

The RBI’s rate cut signals a shift towards economic expansionproviding relief to borrowers and businesses. However, with global uncertainties and domestic fiscal challenges, future rate decisions will be closely monitored.