1 / 9All eyes are set on the Reserve Bank of India’s (RBI) December Monetary Policy Committee (MPC) meeting, taking place from December 4 to 6. While economists believe a rate cut is improbable, the RBI is expected to prioritise liquidity management, potentially by tweaking the Cash Reserve Ratio (CRR).
2 / 9In its fourth bi-monthly policy decision on October 9, the RBI held its inflation forecast for 2024-25 steady at 4.5%. Meanwhile, India’s Consumer Price Index (CPI) inflation for October surged to a 14-month high of 6.21%, driven by soaring food inflation at 10.87%. Both urban and rural inflation rates also remained significantly elevated.
3 / 9RBI, in the October policy decision also maintained its GDP growth projection for the fiscal year 2025 at 7.2%. However, India’s GDP growth for the July-September quarter slowed to 5.4%, the lowest in seven quarters and below the RBI’s forecast of 7%. As the RBI prepares for its policy meeting on December 6, here a look at what experts are saying:
4 / 9Sajjid Chinoy | Sajjid Chinoy, JPMorgan’s Chief India Economist, noted that average CPI has been 5.8% over the past four years, dropping to 5% this year, highlighting a tough tradeoff. He expects the RBI to set the stage for a February rate cut by adopting a dovish stance and focusing on liquidity management in December, ensuring effective market transmission. “Without the liquidity management from December onwards, any cut in February will not transmit into financial markets. So, the way I see this is, that you use this meeting to inject liquidity pivot and then ease in February,” he said.
5 / 9Rajiv Anand | Rajiv Anand, Deputy Managing Director of Axis Bank, highlighted that despite persistent inflation, a Cash Reserve Ratio (CRR) cut could alleviate liquidity pressures and reduce the high costs of raising deposits. “A CRR cut would ease liquidity pressures and help bring down deposit-raising costs, which currently range between 7.5-8%, even though the repo rate stands at 6.5%,” Anand explained.
6 / 9Samiran Chakraborty | Samiran Chakraborty, Chief Economist for India at Citi, noted that there could be merit in considering a Cash Reserve Ratio (CRR) cut. He added, “At this time, some liquidity easing could serve as the first step toward broader monetary policy easing through rate adjustments.”
7 / 9Pranjul Bhandari | Pranjul Bhandari, Chief India Economist at HSBC, anticipates the next RBI interest rate cut to occur in February, though she acknowledged some uncertainty, with April also being a possibility. “Our best hope is for monetary policy easing to take shape in February,” Bhandari stated, describing the decision as a “toss-up” between February and April, with February currently being the projected timeline.
8 / 9Girish Kousgi | Girish Kousgi, Managing Director and CEO of PNB Housing Finance, anticipates a rate cut before March. He remarked, “I think the expectation is that a rate cut will come before March. I’m not sure about this month, but definitely in February, a cut is expected. There may be liquidity easing measures taken in this MPC, but a rate cut will definitely come in the next MPC.”
9 / 9Prakash Diwan | Market expert Prakash Diwan emphasised that the current expectations are more about anticipation than any structural change. He stated, “The MPC can only recommend a repo rate cut, but the CRR cut, which could have a more significant impact, is still uncertain. I wouldn’t make too many assumptions about this, as things could change dramatically, potentially leading to a sharp cut if expectations don’t materialise as anticipated.”
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