Chances brighten for back-to-back rate cuts

Tariff war a risk, but short-term outlook for prices benign

- PRIYANSH VERMA

A LOWER-THAN-EXPECTED retail inflation print for February and the likelihood of inflation aligning closer to the Reserve Bank of India's (RBI) target of 4% in the coming financial year may prompt the central bank to opt for another 50-basis point cut in the policy repo rate in FY26, an FE poll of 12 economists showed.

Many of them, however, say the risks to inflation still remain due to the onset of global tariff wars triggered by the US, threats of imported inflation, relentless depreciation of the rupee against the dollar, and the likely rise in prices of key food items.

Among the economists who FE spoke to, most expect the RBI's monetary policy committee (MPC) to cut the policy rate by 50 bps in two successive meetings — April and June. Currently, the repo rate is 6.25%.

"I EXPECT TWO more rate cuts of 25 bps each in April and June...and then risks of one or two more if extreme weather remains at bay," said Dhiraj Nim, economist at ANZ Research. "I believe the RBI may have to lower their FY26 inflation forecast by 20-30 bps eventually," he added.

The RBI has projected CPI inflation to average 4.2% in FY26, down from 4.8% in FY25.