SBI Predicts Aggressive Rate Cuts Amid Low Inflation

SBI Research anticipates significant interest rate cuts between 125-150 basis points this fiscal year, driven by low inflation. The report suggests that larger 50 basis point cuts could be more effective. It foresees nominal GDP growth between 9-9.5% for FY2025-26, allowing for a Goldilocks period for policy rate reductions.

The State Bank of India's Economic Research Department has issued a report predicting that the Reserve Bank may implement a cumulative interest rate cut in the range of 125-150 basis points this fiscal year, citing benign inflationary conditions.

The report recommends "jumbo" cuts of 50 basis points each, arguing that such a strategy would be more effective than smaller, more frequent cuts.

With consumer price index-based inflation at a 67-month low, primarily due to declines in food prices, the analysis points to a favorable environment for reducing the policy rates.