RBI Could Adjust Policy Amid Global and Domestic Economic Shifts

The Reserve Bank of India (RBI) might consider further interest rate cuts based on forthcoming GDP figures and potential aggressive rate slashes by the US Federal Reserve due to a vulnerable labor market, HSBC Mutual Fund reports. During its recent policy meeting, the RBI's Monetary Policy Committee (MPC) retained a GDP growth forecast of 6.5% for the fiscal year 2026.

Despite earlier frontloaded cuts of 100 basis points, the central bank has maintained the repo rate at 5.50%, opting for a neutral stance. The MPC cited recent rate decreases and global uncertainties, such as tariffs, as risks to economic growth but downplayed their potential effects on inflation.

The report suggests that additional easing may be feasible if economic growth or US labor market conditions trigger significant monetary responses. Currently, government security rates are expected to stay stable, with liquidity as a yield driver. The RBI aims to ensure prior rate cuts' benefits reach the public, and corporate bonds in the 2-4 year range show promising spreads over government bonds, making them attractive for investors.

(With inputs from agencies.)