No Space for Rate Cuts as Inflation Holds Steady

The Reserve Bank faces constraints in cutting interest rates throughout FY26 due to persistent inflation, according to Axis Bank's chief economist Neelkanth Mishra. He anticipates inflation averaging 4.5% for FY26, which will limit rate cuts. Mishra highlights investment over consumption for economic growth.

The Reserve Bank is unlikely to have room for interest rate cuts throughout fiscal year 2026, driven by steady inflation rates, according to insights shared by a senior economist on Wednesday. Neelkanth Mishra, chief economist of Axis Bank, emphasized that this scenario would persist despite any changes in leadership at the central bank.

Mishra projected inflation will average at 4.5% for FY26, leaving minimal opportunity for rate reductions until the end of the fiscal year. He mentioned the challenge posed by inflation, with headline numbers expected to hover between 4.5-5%.

Highlighting investment as a core driver for growth, Mishra observed that economic expansion will be propelled by high capacity utilization across sectors. He also noted the upcoming rise in state cash transfers to women as a positive economic factor.

(With inputs from agencies.)