ANI
14 Aug 2025, 13:05 GMT+10
New Delhi [India], August 14 (ANI): The Reserve Bank of India's Monetary Policy Committee (MPC) could consider reducing policy rates further if upcoming GDP data comes in lower than expectations and the US Federal Reserve begins aggressive rate cuts due to a weaker labour market, according to a report by HSBC Mutual Fund.
For FY26, the RBI-MPC, in its latest policy meeting has kept the GDP growth projection at 6.5 per cent. Quarterly GDP growth is projected at 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4.
The central bank had also decided to leave the repo rate unchanged at 5.50 per cent and maintained its neutral stance. The decision comes after frontloaded cuts of 100 basis points in earlier policies.
The MPC highlighted that it opted for a pause in view of the recent rate reductions, while also recognizing that global uncertainties and tariffs pose risks to growth. However, it downplayed the likely impact of these risks on inflation.
The report stated 'Any possible room for further easing may open up if GDP prints come lower than expectations'.
In its outlook, the report stated that the MPC is likely to remain data dependent. Any further room for easing could open up if economic growth underperforms expectations and if the US Fed begins aggressive rate cuts to address weaker labour market conditions.
Till such triggers emerge, government securities (G-Sec) rates are expected to remain range bound.
The report said it believes liquidity will continue to be the main driver of yields. The RBI is expected to keep providing ample liquidity in the banking system to ensure that the benefits of earlier rate cuts are fully transmitted.
At present, corporate bonds in the 2-4 year segment are offering favourable spreads of 65-75 basis points over Indian government bonds (IGBs), and these are likely to benefit from spread compression.
With the easing cycle nearing its end, focus is likely to remain on corporate bonds to capture the carry, and the report indicated an overweight position on 2-4 year corporate bonds.
Looking ahead, the report mentioned that RBI-MPC is expected to take a calibrated approach by the end of calendar year 2025, particularly as inflation is projected to remain benign until the fourth quarter of FY26.
Liquidity conditions are also expected to stay comfortable, with cash reserve ratio (CRR) cuts set to take effect in one month, helping previous policy easing feed through into lower borrowing rates.
The report added that a potential rate cut by the US Fed from September could give the RBI more room to act. With inflation staying benign, India's growth story will remain the key focus at the upcoming policy meetings.
The RBI Governor, during the press conference, has reiterated that policy decisions will be made on a meeting-by-meeting basis and will remain dependent on incoming data. (ANI)
Get a daily dose of Perth Herald news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Perth Herald.
More InformationNew Delhi [India], August 14 (ANI): The Reserve Bank of India's Monetary Policy Committee (MPC) could consider reducing policy rates...
New Delhi [India], August 14 (ANI): Generative Artificial Intelligence (AI) has the potential to improve banking operations in India...
(Photo credit: Steve Roberts-Imagn Images) Field Level Media's Golf Glance provides weekly news and storylines from each of the major...
Bulgarian Transport Minister Grozdan Karadjov has explained that the escort of a Ryanair flight from Sofia to London by German fighter...
In Florissant, a suburb of St. Louis, beauty store co-owner Trinita Rhodes said her shelves tell the story of how tariffs have reshaped...
Islamabad [Pakistan], August 13 (ANI): Pakistan's trade deficit surged by a staggering 44 per cent in July, driven by a sharp increase...
CANBERRA, Australia: Prime Minister Anthony Albanese announced on August 11 that Australia will formally recognize a Palestinian state,...
Cincinnati [US], August 14 (ANI): The top-ranked Aryna Sabalenka reached one step closer to the honour of defending her Cincinnati...
London [UK], August 14 (ANI): Former England cricketer Michael Atherton said that Hampshire pacer Sonny Baker is 'quite lively' and...
London [UK], August 14 (ANI): Ahead of the away Ashes series against Australia from November 21 onwards, ex-England skipper Nasser...
Washington [US], August 14 (ANI): Seven-time Grand Slam champion Venus Williams is the headlining the wildcard category for the women's...
(Photo credit: Kirby Lee-Imagn Images) Lionel Taylor, a member of the Denver Broncos' Ring of Honor and the first pro receiver to...
