RBI To Cut Interest Rates In October At The Earliest, Says S&P Global

The Reserve Bank of India to cut rates twice over the course of the fiscal year, with a possibility of the first cut in October at the earliest, global ratings agency, S&P Ratings expects said in a note on Monday.

"GDP growth moderated in the June quarter as high interest rates temper urban demand, in line with our projection of 6.8% growth for the fiscal 2024-25," it said, adding that the full budget presented in July confirmed that the government remains committed to fiscal consolidation and to keeping the focus of public expenditure on infrastructure.

However, the RBI continues to consider food inflation a hurdle for rate cuts. "It reckons that unless there is a lasting and meaningful decline in the rate at which food prices are increasing it will be tough to maintain headline inflation at 4%," the rating agency said.

The Reserve Bank of India's Monetary Policy Committee will convene from Oct. 7 to Oct. 9. The central bank has maintained its benchmark interest rate at 6.5% since February 2023 to balance inflation control with economic growth.

S&P Ratings forecasts India's GDP growth at 6.8% for the current fiscal, 6.9% and 7% for the next two fiscals respectively, lower than 8.2% in FY24.

Moody's, in an earlier note, flagged concerns around growth. Normalising growth in India will drag on the performance of the Asia-Pacific region, Moody's said. On a calendar year basis, Moody's forecasts India's GDP growth to slow to 7.1% in 2024, and 6.5% in 2025, after growing at 7.8% in 2023.