As inflation hits a multi-year low and expectations remain subdued, a repo rate cut by the Reserve Bank of India (RBI) of 50 basis points is possible in June and August, said a report by SBI Research. The report also suggests that total rate cuts could exceed 100 basis points amid growing concerns over an increasingly uncertain economic environment.
The report anticipates that GDP growth for the financial year 2026 (FY26) will stand at 6.3%, with a downward bias. “With multi-year low inflation this month and benign inflation expectations going forward, we expect rate cuts of 50 basis points in June and August. We believe the cumulative rate cuts could be now more than 100 basis points with an increasingly uncertain growth environment. We forecast GDP growth in FY26 at 6.3% with a downward bias,” said the report.
The RBI’s Monetary Policy Committee (MPC) on April 9 announced a 25-basis-point (bps) cut in the repo rate, reducing it from 6.25% to 6%. This marked the second consecutive rate cut in recent months. On February 7, the central bank reduced the repo rate from 6.5% to 6.25%.
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Policy interest rate cuts provide support to economic growth and enhance both affordability and loan eligibility. The Reserve Bank of India, after its Monetary Policy Committee (MPC) meeting, forecasted the inflation rate at 4%, citing significant improvements in the food outlook.
The latest inflation data released on April 15 shows moderation of inflation in March, which is expected to continue in the coming months as well. The CPI inflation moderated to 3.34% in March 2025, a 67-month low due to a sharp correction in food inflation.
The average CPI (Consumer Price Index) inflation for the financial year 2026 will remain in the range of 3.9%, according to the SBI Research report.
Food and beverage inflation eased by 95 bps (m-o-m) to 2.88% in March, owing to deflation in vegetable prices. The consumer price index (CPI) core inflation stood at 4% in March against 4.1% in February last month, the data shows.
The rural CPI inflation for March stood at 3.25% against 3.29% in its previous month. The March CPI urban inflation was at 3.43% against 3.32% in February, the data says.
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