Lone Analyst Who Predicted Deep RBI Repo Rate Cut Expects One More

The lone economist who predicted the Reserve Bank of India’s out-sized interest rate cut on Friday expects another smaller reduction before the central bank hits a pause. 

There is scope for lowering the benchmark rate by a quarter-point, “but we are close to the end of it,” said State Bank of India’s Soumya Kanti Ghosh, the only economist among 34 surveyed to get it right. He did not give a timeline on when the central bank will do it. 

The RBI delivered a bigger-than-expected 50 basis points rate cut and lowered the cash reserve ratio, with Governor Sanjay Malhotra seeing limited room for further easing. The policy move come as India’s economic growth comes under pressure from trade and tariff uncertainties. 

“The front-loaded cut will counterbalance prevailing uncertainty, which is now the buzzword,” Ghosh said in a telephonic interview. The CRR cut will infuse much-needed liquidity support when credit demand picks up in the second half of the fiscal year starting September, he added.

This is not the first time Ghosh was spot on with his predictions. He was one of the few analysts who had predicted a pause on rate hikes in April 2023. The key rate remained at 6.5% since then for almost two years until Malhotra, who succeeded Shaktikanta Das, started lowering them since February this year. 

Ghosh is also the member of the 16th finance commission, the body that looks at distribution of tax revenues between the federal government and states. 

“I am swamped. But really, I am feeling great today,” he said.