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SBI Research expects the Reserve Bank of India (RBI) to cut the policy rate by 50 basis points each in June and August, as inflation drops to a multi-year low and expectations remain subdued. The report states that total rate cuts could exceed 100 basis points in the face of an increasingly uncertain economic environment. It projects GDP growth for the financial year 2026 (FY26) at 6.3 percent with a downward bias. This outlook follows the RBI’s recent monetary policy actions and the latest inflation data, which shows a broad decline in consumer price indicators across rural and urban segments.
SBI Forecasts Over 100 Basis Points in Rate Cuts
“With multi-year low inflation this month and benign inflation expectations going forward, we expect rate cuts of 50 basis points in June and August. We believe the cumulative rate cuts could be no more than 100 basis points with an increasingly uncertain growth environment. We forecast GDP growth in FY26 at 6.3 percent with a downward bias,” SBI Research said in its report.
RBI Cuts Repo Rate Twice in Recent Months
The RBI’s Monetary Policy Committee (MPC) reduced the repo rate by 25 basis points on April 9, lowering it from 6.25 percent to 6 percent. This followed a previous cut in February when the central bank decreased the rate from 6.5 percent to 6.25 percent. These cuts aim to support growth and improve borrowing conditions. The RBI has projected inflation at 4 percent for FY26, citing an improved food inflation outlook.
Inflation Cools Sharply in March
According to the inflation data released on April 15, the Consumer Price Index (CPI) inflation fell to 3.34 percent in March 2025—a 67-month low. Food and beverage inflation dropped 95 basis points month-on-month to 2.88 percent, driven by deflation in vegetable prices. Core CPI inflation stood at 4.0 percent in March, slightly down from 4.1 percent in February.
Rural and Urban Inflation Indicators Remain Stable
The rural CPI inflation eased to 3.25 percent in March from 3.29 percent in February. Urban CPI inflation increased marginally to 3.43 percent from 3.32 percent during the same period. SBI Research estimates average CPI inflation for FY26 to remain around 3.9 percent.
(With Inputs From ANI)
