Economists see 25-bp rate cut in Feb

With the latest headline inflation rate coming in at 5.48 per cent and expectations of it remaining below 6 per cent in the coming months, economists and the markets are betting on a cut in the policy repo rate of 25 basis points (bps) by the Reserve Bank of India's (RBI's) rate-setting body Monetary Policy Committee (MPC) in the February meeting.

- SUBRATA PANDA

The headline inflation rate went below 6 per cent in November, falling within the RBI's tolerance band of 2-6 per cent, thanks to a moderation in food prices and a favourable base effect, among other factors.

The core inflation rate too eased slightly to 3.7 per cent in November, down from 3.8 per cent in the previous month.

In comparison, the headline inflation rate stood at 6.2 per cent in October and 5.49 per cent in September.

"We expect the RBI to cut rates in February 2025, with a cumulative 75 bps cut over the rate-cut cycle and such a decision is unlikely to be impacted by what could happen to the dollar, as was the case in 2018, when the RBI did not hike rates even as the rupee was under enormous pressure," said an SBI Research report, authored by Soumya Kanti Ghosh, group chief economic adviser, State Bank of India (SBI).

Stating similar views, Radhika Rao, executive director and senior economist, DBS Bank, said: "We maintain our call for a 25 basis point cut at the February meeting, with a cumulative 75 basis point cut in this cycle, keeping an eye on the dollar and dollar liquidity."