RBI May Cut Interest Rates in 2025-26 to Support Slowing Economy: Morgan Stanley Report
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The Reserve Bank of India (RBI) may reduce interest rates during the financial year 2025-26, as per a recent report by Morgan Stanley. This step could be taken to support the slowing economic growth and to take advantage of the controlled inflation in the country.
RBI Present Rate
| Policy Repo Rate | : 6.00% |
| Standing Deposit Facility Rate | : 5.75% |
| Marginal Standing Facility Rate | : 6.25% |
| Bank Rate | : 6.25% |
| Fixed Reverse Repo Rate | : 3.35% |
Why RBI Might Cut Interest Rates
The main reason for this expected move is the slow pace of India’s economic growth. Even though inflation is now under control, the economy is not growing as fast as expected. To give it a boost, the RBI may lower interest rates to make borrowing cheaper for businesses and consumers.
Morgan Stanley suggests that the RBI’s policy approach will focus on supporting the economy when growth shows signs of weakening. This means that if the economy continues to slow down, the RBI could cut rates to help encourage investment and spending.
Expected Interest Rate Cuts
According to the report, the RBI may cut interest rates by up to 100 basis points (1%) in total. It is expected that the central bank will lower the repo rate—which is the rate at which the RBI lends money to banks—to 5.5%. This would include two more rate cuts of 25 basis points (0.25%) each in the coming months.
Global Factors May Influence RBI’s Decision
The report also highlights that if the global economy slows down further, especially if there is a recession in the United States, it could affect India’s growth negatively. In such a scenario, the RBI might decide to cut interest rates even more to protect the Indian economy.
Other Tools to Support the Economy
Besides cutting interest rates, the RBI may also use other tools to support economic activity. These tools include:
- Ensuring enough money (liquidity) is available in the financial system.
- Relaxing loan rules to encourage more lending by banks to individuals and businesses.
Government’s Role in Economic Support
The report also suggests that the government will try to balance its spending, but at the same time, it will likely invest more in major infrastructure projects. This is aimed at creating jobs and boosting economic activity. While the RBI focuses on monetary policy, the government spending will also play a key role in keeping the economy strong.
