RBI Monetary Policy: Goldman Sachs Expects 25-Basis-Point Repo Rate Cut
Monetary easing will help support India's economic momentum in the months ahead, a top Goldman Sachs economist said.
Goldman Sachs anticipates a 25-basis-point repo rate cut by the Reserve Bank of India's Monetary Policy Committee in its upcoming policy announcement, citing a cyclical slowdown and global tensions.
"There is going to be a lot of uncertainty going forward. Policymakers will have to navigate within this mix," Santanu Sengupta, India economist at Goldman Sachs told NDTV Profit. He pointed out that tariff changes and global economic shifts could cause a slight uptick in inflation, but India is expected to be less impacted compared to other economies.
This is the first MPC meeting after the appointment of RBI Governor Sanjay Malhotra and the re-designation of Rajeshwar Rao in the monetary policy department, and the second MPC meeting for the three external members — Ram Singh, Saugata Bhattacharya, and Nagesh Kumar.
Of the 28 economists polled by Bloomberg, 24 expect the MPC to cut the repo rate on Friday.
Sengupta acknowledged that fiscal authorities have preserved ammunition for potential future action, while the RBI has made notable adjustments in its currency stance. "At a time of cyclical slowdown, this will allow the RBI to move forward with an easing stance," he added.
Rupee Depreciation ‘Good Macro Adjustment’
"India was in a very low currency volatility regime for most of last year. The recent depreciation is a catch-up adjustment, which should have happened earlier. It’s a positive macro adjustment," Sengupta said.
While expecting a 25-bps rate cut in the upcoming RBI policy review, Sengupta underscored that recent liquidity easing measures have been significant. "The open market operations will extend the balance sheet, creating reserve money growth and supporting the economy in the second half of the year," he said.
Sengupta said that monetary easing will help support India's economic momentum in the months ahead.
