The Reserve Bank of India delivering a rate cut and changed stance, in line with market expectations, is positive as people do not want any more surprises right now, Moody’s Analytics Economic Research Director, Katrina Ell, said.
Uncertainty has a major negative impact in economies and the effect is pervasive. From last week, bond, currency, and equity markets have witnessed unpredictable moves because of US tariff threats. So, introducing more volatilities at this point was the last thing the central bank wanted to do, she added.
RBI cut the benchmark repo rate by 25 basis points to 6% in its April policy meeting. Members of Monetary Policy Committee voted unanimously to lower the repo rate and change the stance to ‘accommodative’ from ‘neutral’.
The fact that RBI changed the stance to accommodative indicates more easing is possible going forward. Now, Moody’s expects a cumulative rate cut of 75 basis points in calendar year 2025. The door has opened for more easing, depending on how conditions are, Ell said.
The change in RBI’s stance indicates that when global situation turns very volatile, there will likely be a policy response. The response may come in the form of providing ample liquidity or more rate cuts, according to Madhavi Arora, lead economist, Emkay Global Research. She sees uncertainty becoming a theme.
