RBI MPC Monetary Policy Review — Bar For The Next Cut Remains High: Read Dolat Capital Report
The MPC voted unanimously to maintain repo rate at 5.5% and retained the policy stance as neutral.
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With a neutral stance, policy remains data-dependent. Until growth risks worsen, a pause is warranted. Else a 25-bps cut in the next policy meeting in Oct’25. As there are many moving parts, being decisive on either side becomes difficult at this point of time.
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Dolat Capital Report
The Monetary Policy Committee held rates steady, signaling caution amid global headwinds and signs of domestic fragility. Commentary from the governor suggests that the bar for rate cuts remains high in lieu of inflation print expected to move higher from Q4 FY26 onwards.
Global growth momentum is likely to moderate in H2, with risks from tariff wars, softening demand, and renewed US inflation. Domestically, high frequency indicators point to mixed signals in underlying demand. Liquidity remains comfortable, but credit pick up seems to be deferred and expectation in H2 FY26, would see a pickup in credit buoyed by the sentiment around festive season.
The current pause reflects a calibrated, data-driven approach. With easing already frontloaded in the last policy, it seems MPC is preserving room for future rate action (if any).
Way Forward -
With a neutral stance, policy remains data-dependent. Until growth risks worsen, a pause is warranted. Else a 25-bps cut in the next policy meeting in Oct’25. As there are many moving parts, being decisive on either side becomes difficult at this point of time.
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