Will India Finally See A Rate Cut In 2025?

The base case for a Fed cut this year is possibly one, some say even none. How might that impact the thinking of the RBI, you think? When is the earliest possible cut that will be made by the RBI? So if you look at the interest rate swap curve, it is talking about in India, that is it is talking about the first rate cut in calendar year 2025, which is at least two quarters away. So I think that could be a fair precursor. And we got some prelude into the RBI policy where it is two people now voting for a rate cut in contrast to one member in the previous policy. And the RBI minutes also revealed something very similar that the clamour for rate cut only seems to be growing but very unlikely. I would assign a very low chance of something like that happening in this calendar year, more so early part of 2025. What assumptions are you making about inflation? It seems to be trending lower. Core inflation seems to be heading in that direction as well. Is that likely to be sustained? If you look at both the elements, the headline and the core, of course, the Reserve Bank of India looks at the headline. Food prices are worrisome, no doubt, but both of these are clearly displaying a softening trend. So even if we may not achieve a 4% threshold, which the Reserve Bank wants, even if we are at 4.5, real rates in India are fairly formidable to allow for at least a marginal easing, if not substantive. So I think the key would be how the Fed behaves. Not entirely, but certainly that is one precursor or a hygiene check, if not the only condition required for a rate cut in India.