BENGALURU, Sept 27 (Reuters) - The Reserve Bank of India (RBI) is anticipated to reduce interest rates by 50 basis points over the next six months, as indicated by a majority of economists in a Reuters poll. Economists predict that the RBI will likely wait until December to initiate this cut, rather than moving in October.
Inflation has remained below the RBI's medium-term target of 4.0% for two consecutive months as of August. Although a slight increase in inflation is expected in the coming months, it has consistently stayed within the 2%-6% comfort zone for nearly a year, with projections suggesting this trend will continue through mid-2026.
Most economists believe the RBI will not feel pressured to follow the U.S. Federal Reserve's recent 50 basis-point cut, attributing this to a robust domestic economy and a stable currency. The median forecasts for the repo rate have remained unchanged in Reuters polls since April.
In a recent poll, over 80% of economists (63 out of 76) predicted that the RBI would maintain the repo rate at 6.50% during its upcoming meeting on October 7-9. Twelve economists forecasted a 25 basis-point cut, while one anticipated a drop to 6.15%.
The RBI has kept the repo rate steady since February 2023, focusing on maintaining a stable trading range for the rupee through direct intervention in the foreign exchange market. Suman Chowdhury, an economist at Acuite Ratings, stated, "The reason why the RBI will not be in a hurry, unlike the Fed, is because the Indian economy is still on a very strong wicket." He noted that food inflation is showing signs of decline, which may lead to a rate cut in December.
Governor Shaktikanta Das emphasized the importance of not overreacting to temporary dips in inflation, suggesting that the RBI would require more evidence of sustained low inflation before feeling confident enough to cut rates.
As uncertainty looms over the appointment of three new external members to the Monetary Policy Committee, some economists refrained from providing rate estimates beyond the upcoming meeting.
Median forecasts suggest a quarter-point cut in the next quarter, with nearly 60% of economists expecting rates to drop to 6.25%. However, just under a third still see rates remaining at 6.50%, while the remainder expect rates to be 6.15% or lower.
Despite a recent decline, the poll anticipates Indian inflation to rise again, averaging 4.5% for this fiscal year and 4.3% for the next. Asia's third-largest economy is projected to grow by 6.9% this fiscal year, a decrease from the 8.2% growth seen in FY 2023-24, yet it remains the fastest-growing major economy.
Reporting by Anant Chandak; Polling by Devayani Sathyan and Veronica Khongwir; Editing by Hari Kishan, Ross Finley and Hugh Lawson