RBI Poised for Policy Rate Cuts Amid Falling Inflation: Morgan Stanley Report
Morgan Stanley anticipates the Reserve Bank of India will lower policy rates by 25 basis points in October and December MPC meetings, citing lower inflation. With CPI inflation projected at 2.4% for FY26, well below the 4% target, RBI may have room for monetary easing amid subdued nominal GDP growth.
- Country:
- India
The Reserve Bank of India (RBI) is likely to lower its policy rates by 25 basis points during the Monetary Policy Committee (MPC) meetings this October and December, predicts a report by global brokerage, Morgan Stanley. The central bank reportedly has the latitude for monetary easing as inflation remains subdued below targets.
Morgan Stanley's projections indicate that the headline consumer price index (CPI) inflation will average 2.4% year-on-year in FY26, significantly lower than the RBI's target of 4%. The report adds that disinflationary forces, such as low food prices and recent GST rate cuts, continue to support the trend of subdued inflation.
The report also warns of a cautious outlook on nominal GDP growth, anticipated at just 8.3% in FY26, attributing this to weak price trends and potential adverse tariffs from ongoing trade negotiations with the United States. However, a consistent soft trend in inflation could provoke deeper policy rate cuts by the RBI.
(With inputs from agencies.)
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