Interest rates will be deducted
The Reserve Bank of India refused to cut the repo rate in the recent monetary policy meeting. After the cut in GST, the countrymen were expected to get a discount in interest rates. But this did not happen. In its policy meeting of October, the RBI kept the repo rate unchanged at 5.5% in its policy meeting and did not change it for the second consecutive time. On this, American firm Morgan Stanley said that the RBI may cut the next MPC meeting to be held in December and then in February 2026, which can reduce the repo rate by 5%.
The report states that we see the possibility of deduction of 25 basis points in the December policy, which is in line with the trend of domestic development-inflation. RBI has increased its GDP estimate for FY 26 from 6.5% to 6.8%. Also, due to problems related to trade and tariffs, there is a possibility of decrease in economic growth in the first half of FY 26.
Decorated inflation reduced
The RBI has also reduced the main consumer price index (CPI) inflation estimate for FY 26 to 2.6% from the earlier 3.1% to 2.6%. The report states that RBI expects inflation to be around 4.5% next year. However, Morgan Stanley estimates that inflation in FY 26 and 27 will be less than 4% on average, while overall economic growth may be weak.
This creates the possibility of cutting interest rates. Morgan Stanley said that RBI should have cut interest rates in this meeting itself, because the effect of monetary policy takes time to show. The report states. Now there was the right time to cut interest rates, because policy impact is delayed. These are the main reasons for this.
- Frequency to lower prices in the main consumer price index (CPI)
- Weak economic growth status
- Favorable global economic environment