RBI is likely to hold rates despite Trump's Rate Salvo: Mint poll

Copyright © HT Digital Streams Limit all rights reserved. Earlier this month, RBI Governor Sanjay Malhotra said both lower inflation and a slowdown in growth could be equally important catalysts for possible rate cuts. (Photo: AFP) Summary of the 15 economists asked are opinions. While 11 economists expected the RBI MPC to maintain the status quo, four expected it to reduce the repo rate by 25 basis points Mumbai: US President Donald Trump’s decision to set up a 25% tariff on Indian goods is unlikely to retain interest rate policy of the Reserve Bank of India’s Monetary Policy Committee (MPC) in the coming will be hindered. Most of the economists surveyed maintained their previous expectations despite the sharp 25% tariff by the US on Indian goods and an extra fine for importing crude oil from Russia. Opinions among the 15 economists asked were divided. While 11 economists expected the MPC to keep the rates unchanged, four predicted that the six-member setting panel would lower the repo rate by 25 basis points to 5.25%. The RBI’s tariff setup panel is scheduled to announce its policy decision after its August 4-6 meeting. The central bank is also expected to maintain its ‘neutral’ attitude, which can move it in any direction. “We have not changed our views based on the tariff announcement, and are currently holding our call from a 25 BPS cut during the upcoming meeting. It would be largely driven by a downward review in the CPI inflation projections of the central bank,” said Aditi Nayar, main economist, main research and outreach. Although the last policy is a cut of 50-base point rate and a 100-based point reduction in CRR CRR) amid the slowdown and cooling of inflation, this time economists are more careful, given global volatility. Separately, the transfer of previous rate cuts is still underway and may still take time to show its effect on the economy. So most of the economists expect the next round of 25 basis points to lower only in the second half of the year. RBI Governor Sanjay Malhotra, earlier this month, said in an interview with CNBC TV18 that both inflation and a slowdown in growth could be equally important catalysts for possible rate cuts. That said, economists do not exclude the impact of higher rates and fines on growth. Most economists expect an impact of 20-40 basis points on the growth of India if the rates reach exports to the US. India’s bilateral merchandise surplus with the US has doubled over the past ten years and has grown from $ 20 billion in FY15 to $ 40 billion in FY25. This increase is mainly driven by higher surpluses in sectors such as electronics, pharmaceuticals and textiles. According to Gaura Sengupta, chief economist at IDFC First Bank, the situation remains fluent with trade negotiations, and the central bank can simply flag the tariff -related risks in its comments. “The announcement is too recently and has no clarity on implementation. RBI probably mentions tariff uncertainty as a risk of growth, but it is unlikely to change his FY26 GDP estimate of 6.5%,” Sengupta said, adding that almost half of the FY26 is over and a significant pre-load of the US can grow on the overall. Inflation projection Since the last monetary policy, the inflation of the consumer price has moderated to a 77 -month low of 2.1% due to a relentless drop in food prices. Inflation is expected to average below the 4% goal over the next two quarters, supported by a favorable base and subdued food inflation. However, the head inflation is expected to start to rise from the third quarter and reach above the 4% mark by the fourth quarter of this financial year, as the favorable base effect decreases. Economists therefore expect the RBI to revise the FY26 inflation forecast slightly lower. “We expect the RBI to revise its FY26 CPI inflation lower to 3.3-3.4%, from 3.7% earlier, while the Jan-March’26 and FY27 forecasts are maintained at 4.4% and 4.5% respectively,” said Kaushik Das, chief economist, Deutsche Bank. Liquidity, on the other hand, remains in surplus with the RBI that performs variable reverse repo (VRRR) auctions to suck out excess liquidity. From Wednesday, net liquidity in the banking system amounted to a surplus of £ 2.54 trillion, according to the latest RBI data. From September, the cumulative CRR cut of 100 BPS will come into effect, which adds a further liquidity of £ 2.5 billion. Market participants also expect the RBI to release the revised liquidity framework in the upcoming policy to make the short-term liquidity anchor more effectively and banks give greater predictability on overnight rates. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More topics #rbi mpc #rbi -policy meeting read next story