On the backdrop of anticipated expectations of a rate cut, the Reserve Bank Of India’s Monetary Policy Committee is scheduled to meet between April 7-9, 2025, with inflation sharply reduced and some gravelly concerns hovering the global economy.

Easing Inflation Strengthens Case for Rate Cut

Retail inflation has taken a decidedly downward turn leading to the Consumer Price Index (CPI) plunging to 3.6% in February 2025, compared to 4.3% in January. For the first time in seven months, inflation fell beneath the RBI’s target of 4%, primarily due to a decrease in food prices. Falling inflation gives the central bank a chance to exercise its power in monetary easing measures to bring in growth in the economy by pumping more cheaper money into people’s hands.

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Economic Indicators and Market Sentiment

Apart from softening inflation, other economic factors also motivate analysts to predict possible rate cuts this time around. India’s manufacturing witnessed a positive growth in March, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) soaring to 58.1 from February’s 56.3 marking it as the fastest eight-month expansion driven by solid domestic demand. However, slower growth in export orders is also indicative of a weak global demand.

Moreover, the bond markets also mirror the positive expectations of analysts on soft monetary easing. Foreign possession of government bonds in India crossed the ₹3 trillion level against the bet of a rate cut in around April. 

March also observed buoyancy in foreign ownership, particularly in Fully Accessible Route (FAR) bonds, as investors had become inclined to put together their holdings in anticipation of imminent capital gains derived from falling bond yields. ​

Global Economic Uncertainty and Trade Dynamics

Globally, the economic environment poses challenges that make a cautious view of the monetary policy warranted . The retaliatory tariffs announced by the United States have unsettled investors and traders, increasing their concerns for global trade and growth. 

The Indian rupee has strengthened due to increasing dollar inflows and foreign investments, but these trends may now pressure it. Analysts estimate a range for the rupee in FY2026 at 85-89, where the RBI might probably intervene in response to the market.

Analyst Projections and Market Expectations

Market analysts widely anticipate the April RBI MPC meeting is when the central bank will introduce a 25-bps cut in the repo rate, currently at 6.25%, down to 6.0%. A Reuters poll suggests another similar 25-bps reduction in August this year, bringing the overall cut to 75 basis points. Following these rate cuts, a long period during which rates will possibly not be changed is to be expected.

The OIS markets have also started pricing aggressive rate cuts for FY26, and more than 50 basis points of cumulative cuts are expected over the next 12 months. This turn can be attributed to inflation nearing the RBI’s target and fears of weak economic growth.

Conclusion

Easing inflation, robust domestic manufacturing activity, and global economic uncertainties may lead to a consensus among many analysts on the rate cut being the forefront issue to discuss during the upcoming MPC meeting of the RBI. 

Analysts predict this rate cut will be aimed at boosting growth while also helping navigate the uncertainties created on account of the prevailing global economic environment. Market participants and analysts will be closely watching the implications of the decisions of the RBI over the next few months for the Indian economy.