The Reserve Bank of India's (RBI) repo rate is expected to drop by 25 basis points (bps) to 6.00 per cent after the ongoing Monetary Policy Committee (MPC) meeting, according to Goldman Sachs. "We expect a 25bp repo rate cut from the RBI Monetary Policy Committee (MPC) at the April 9 meeting, taking the repo rate to 6.00 per cent," the report said, adding that it expects a 5.50 per cent repo rate by year-end.
The financial services company said that several factors have created a favorable environment for the RBI to ease the policy rates. It points out that the domestic economic activity showed signs of moderation in the first quarter, as indicated by high-frequency data.
Inflation is expected to remain benign, with financial services firm estimating March's Consumer Price Index (CPI) inflation at 3.7 per cent. In addition, a sharp drop in Brent crude oil prices and the US Dollar Index (DXY) following President Trump's recent tariff announcements have contributed to the RBI's likely decision to cut rates, as anticipated by the firm.
The report added that the the banking system's liquidity surplus which stands around Rs 1 trillion (approximately 0.5 per cent of net demand and time liabilities), has been a result of RBI's persistent liquidity injections, including an Rs 800 billion open market operation (OMO) purchase announced last week. -- ANI