GoodReturns Poll: 25 Bps Rate Cut Likely On April 9; Will RBI Change Policy Stance Due To Trump's Tariff?

RBI Monetary Policy Poll: The Reserve Bank of India will most likely cut its repo rate on Wednesday by 25 basis points despite the worst stock market meltdown since the COVID-19 pandemic in 2020 led by the tariff war, according to an exclusive poll conducted by GoodReturns.In which also indicated that economists are skeptical about the impact of US President Donald Trump's trade policy on the global economy.

As per a poll of 33 economists conducted by GoodReturns.In, 29 economists out of the total are predicting a 25 basis point rate cut in key interest rates from RBI.

"For now, we are maintaining our baseline GDP growth forecast of 6.5% for FY2026. As a result, we continue to expect the MPC to reduce the repo rate by 25 bps on April 9, based on the expectation of a moderation in the CPI inflation to 4.2% on average in FY2026," Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA.

ICRA's economist believes the relative tariff scenario is going to continue to evolve as the year progresses.

Meanwhile, Shilan Shah, deputy chief emerging market economist at Capital Economics, said, "The recent sharp drop in headline CPI inflation means that the Reserve Bank is primed to cut the repo rate again at the conclusion of the MPC meeting on Wednesday, 9th April." Shah is also forecasting a 25 bps cut as well on Wednesday.

The majority of the economists in the poll predict the status quo in monetary policy stance. However, one expert believes along with a 25 bps rate cut, RBI could bring back its accommodative stance, which is cautionary and hawkish.

"We expect a 25bp cut in policy rate in the upcoming MPC verdict. Further, we do not expect any changes in stance. With the announcement of INR 0.8 trillion (INR 80,000 Cr) OMO purchases in April, the likelihood of the announcement of the change of stance from "neutral to accommodative" during April policy stands reduced," Mandar Pitale, Head, Treasury, SBM Bank India, said.

On the other hand, Puneet Pal, head of fixed income at PGIM India Mutual Fund, said, "Bond markets are discounting a dovish MPC meeting next week, and we also expect monetary support at a time of heightened global uncertainty. We expect a 25 bps repo rate cut along with a change in monetary policy stance to "accommodative," though the short forward USD positions of RBI have touched USD 89 bn as of the end of February, which remains the joker in the pack."

The repo rate target for Q1 of FY26 ranges between 6% to 5.75%, with few economists predicting another 25 bps cut in June policy, as per the poll.

"A final rate cut of 25 bps may be forthcoming in the June or August 2025 policy review, based on the evolving growth inflation dynamics," said
Aditi.

In the longer duration, the repo rate is seen at 5.5% for the entire financial year 2025-26. Shah said, "In total, we maintain our long-held forecast that the repo rate will fall to 5.50% in this cycle. That is still a touch more dovish than consensus expectations."

Overall, the inflation target for FY26 is ranging between 4% to 4.5%, as per the poll.

"Average CPI inflation in FY26 is expected to converge near 4%. Now since the rate cut cycle has begun, it will be imperative on the part of the regulator to ensure adequate liquidity in the banking system as a prerequisite for effective transmission of policy rate actions on banking sector assets as well as liabilities," said Pitale.

Dipanwita Mazumdar, economist at Bank of Baroda, said inflation moderation is maintained into April 2025, though at a softer pace. The economist said, "CPI inflation is projected to be around 3.6% in March 2025, with FY25 inflation estimated at 4.6%, lower than RBI's target of 4.8%." He also does not see a major risk in India's inflation going forward in FY26 as well.

Bank of Baroda's economist explained that the inflation differential between India and the US was largely maintained at the FY24 levels. The major loss of momentum has been seen since January 25 onwards as inflation in India softened considerably, driven by a correction in food prices. Going forward, we expect the inflation differential between India and the US to be ~200bps. Inflation in the US is likely to exhibit some bit of firmness on account of the tariff-related issues.

For India, Mazumdar said, "Since the CPI basket has limited pass-through in terms of imported inflation, we do not foresee major risks."

Overall, Bank of Baroda is expecting a cumulative 25 bps cut in FY26. Mazumdar said, "If we compare it to long-run averages, the policy rate differential is far lower. Hence, mean reversion levels might call for a faster pace of easing by the Fed compared to RBI. The recent Fed commentaries have also been considerably dovish, hinting at an inflation bump due to tighter tariff norms being transitory. The Fed projections have priced in two rate cuts of 25bps each this year. We are expecting a cumulative cut by RBI of another ~50 bps; thus, policy rate differential is expected to exhibit some bit of firmness in FY26."

In the past few days, global financial markets have crashed - from the US to Japan to India - and stock market investors bet on mounting risks of a global recession as Trump showed no inclination to back away from his tariff plans.

Starting April 2, 90 countries around the globe have been hit with tariffs from the US which Trump referred to as "medicine" and while India was imposed with a "discounted" tariff, it will still hurt the export sector the most.

On April 9th, RBI will announce the monetary policy outcomes of its 3-day-long meeting that began on April 7th.

In the February 2025 policy, the RBI governor Sanjay Malhotra led MPC unanimously decided to reduce the policy repo rate by 25 bps to 6.25%, marking the first easing in rates in five years. Prior to the February policy, repo rates were kept unchanged at 6.25% for eleven consecutive policies. RBI under Shaktikanta Das had increased the repo rate by 250 bps from May 2022 to February 2023 due to severe inflationary pressure.

Currently, India's repo rate under the liquidity adjustment facility (LAF) is 6.25%, while the standing deposit facility (SDF) rate is adjusted to 6%, and the marginal standing facility (MSF) rate and the Bank Rate are at 6.50%.

Additionally, RBI's monetary policy stance is neutral but remains unambiguously focussed on a durable alignment of inflation with the target, while supporting growth.
The central bank aims to achieve the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.

Moreover, India's inflation cooled better than expected to 3.62% in February 2025, compared to the revised 4.26% rate in the prior month. CPI was better than market estimates of 4%. As per Trading Economics data, this marked the slowest rise in consumer prices since July of the previous year and the first time in six months that inflation fell below the Reserve Bank of India's 4% mid-point target.