RBI may cut repo rate again in April

The Reserve Bank of India (RBI) cut its repo rate by 25 basis points to 6.25% on February 7, 2025. This move was part of a broader cycle of rate cuts initiated by the RBI. The recent decision by the US Federal Reserve to keep its interest rates steady has sparked discussions about how central banks worldwide, including the RBI, might react. The US Fed has indicated a cautious approach, with projections for two interest rate cuts later in 2025. Current economic growth in the US is expected to be 1.7%, while inflation stands at 2.7%. The Fed's comments on tariffs and their effects on inflation add complexity to the global monetary landscape. Market experts see a mixed impact on emerging markets, including India. Some suggest that the Fed's stable rates may ease financial pressures, but volatility could still persist in these markets. Madhavi Arora from Emkay Global Financial Services notes that the RBI's efforts to improve liquidity could lead to a surplus, making an April rate cut plausible. Higher US interest rates typically cause foreign capital to leave countries like India, while lower rates could attract investors. Ravi Singh from Religare Broking points out that market sentiment in India will depend on these capital flows. If US rates fall, it might boost investment in India, while a stronger dollar could affect commodity prices, especially oil, which is crucial for the Indian economy. Analysts like Ajay Garg from SMC Global Securities believe that the Fed's rate cuts could benefit India by increasing capital inflows and strengthening the rupee. Despite global uncertainties, India's stable GDP growth and declining inflation provide the RBI with room to cut rates further, potentially increasing consumer spending and market liquidity. Many believe the RBI may announce another rate cut in April, as evolving global conditions and local economic factors align. With improving liquidity and stable growth, analysts suggest the RBI's next steps will be closely watched in the coming months.