RBI may cut repo rate only in Q3 FY25: SBI economist

Chennai: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) may cut repo rate only in the third quarter of FY25 and not before, said a top economist in the State Bank of India (SBI).

In a research report, Soumya Kanti Ghosh, the Group Chief Economic Advisor, also said that the RBI will not change its stance and continue with the withdrawal of accommodation.

The first meeting of the MPC for this fiscal will be held this week.

The repo rate is the rate at which the RBI lends to commercial banks. Currently, the rate is 6.5 per cent.

According to Ghosh, with moderate fuel prices, inflation is currently being driven by food price dynamics. The Consumer Price Index (CPI) inflation is mostly driven by 'good' inflation (economists are of the view that inflation at about 2 per cent is good for the economy).

Looking ahead, evolving food prices will determine domestic inflation. CPI inflation is expected to remain slightly above 5 per cent in the remaining months of FY24. The core CPI declined to 3.37 per cent - a 52-month low, Ghosh said in the report.

He also said that inflation is expected to decline till July this year, but increase after that to reach a peak of 5.4 per cent in September, followed by a deceleration. For the whole of FY25, CPI inflation is likely to average to 4.5 per cent (FY24 - 5.4 per cent).