NEW DELHI: The Reserve Bank of India (RBI) may implement a 25 basis point rate cut in the fourth quarter this year if moderate high-frequency data from June continues, a report said on Wednesday.
The high one-year-ahead growth and inflation forecasts from RBI have led some market participants to believe RBI will be hesitant in further easing, but the central bank may lower its forecast and cut rates, according to the report from HSBC Global Investment Research.
"If high frequency activity indicators stay weak in the coming months, the RBI is likely to lower its growth forecast. A 25 bps repo rate cut is expected in Q4, bringing the repo rate to 5.25 per cent, " the report said.
The RBI maintained the policy rate at 5.50 per cent during its August meeting, following significant easing in the prior session.
Inflation came in at 1.6 per cent YoY; even though food prices rose gently, energy prices deflated and core inflation eased, leading to an eight year low print. The sequential momentum was subdued at 0.1 per cent. The average sequential momentum for the past six months has been flat.
CPI inflation is expected to average 3.2 per cent in FY26, driven by favourable base effects, well-stocked granaries, healthy kharif crop sowing, and weak commodity prices.
Vegetable prices, previously in disinflation for six months, picked up faster than expected, leading to today's unexpected print, the report said.