• Investing
  • Stock
  • Economy
  • Editor’s Pick
Portfolio Performance Today
Stock

RBI turns neutral after sharp rate cut; ING expects another easing later this year

by June 7, 2025
by June 7, 2025

In a surprise move, the Reserve Bank of India slashed policy rates beyond market expectations and shifted its policy stance from accommodative to neutral. 

ING Group suggests the RBI’s current action indicates a likely pause in policy adjustments.

However, the possibility of future easing remains open, contingent on potential declines in either growth or inflation.

The Reserve Bank of India (RBI) has significantly lowered the repo rate by 50 basis points (bps) to 5.5%, exceeding market expectations. 

The cut in interest rates brings the total repo rate reduction by the RBI in the current cycle to 100 bps, resulting in a real policy rate of 2.3%.

The RBI also reduced the cash reserve ratio by a massive 100 bps to 3%, the lowest since 2021.

“The RBI’s rate actions today hint at growing conviction within the Monetary Policy Committee that lower inflation is likely to persist, and that GDP growth remains on a weaker trajectory,” Deepali Bhargava, regional head of research, Asia-Pacific at ING Group, said in a note. 

By front-loading rate cuts, the RBI seems keen to ensure the benefits of lower rates reach the economy and that there’s plenty of liquidity to keep things moving.

Not the end of rate cuts

The RBI surprised markets by changing its policy stance from ‘accommodative’ to ‘neutral’.

This shift was particularly unexpected as it occurred only two months after adopting an accommodative position, marking a significant reversal.

“That’s a pretty quick U-turn, and it suggests the central bank might be done with rate cuts for now,” Bhargava said. 

Even though CPI inflation remains under the RBI’s target and the real policy rate exceeds the typical comfort level of roughly 1.5%, it paradoxically feels somewhat counterintuitive, according to Bhargava.

She said:

We continue to expect another 25bp rate cut by the RBI this year in the fourth quarter. 

The RBI indicates a halt in policy adjustments but retains the option for further easing should economic growth or inflation decline.  

It has revised down its consumer price index inflation prediction from 4.0% to 3.7% and maintained its GDP growth forecast at 6.5% for the fiscal year concluding in March 2026.

“Our own GDP growth estimates are slightly weaker than the RBI’s, and with real policy rates still sitting well above historical norms, we continue to expect one 25bp rate cut from the RBI later this year, likely in 4Q,” Bhargava said. 

Impact on markets

A solitary interest rate cut today is unlikely to significantly affect the Indian Rupee (INR), according to ING.

This is likely a reaction to decreased inflation rather than an indication of growth worries.

ING anticipates fluctuating market conditions. However, the RBI’s focus on building foreign exchange reserves, a projected GDP growth slowdown due to tariffs and geopolitical issues, should support the currency and likely lead to an upward trajectory.

In the past year, the 10-year bond yield has seen a surge of over 100 basis points.

This increase can be attributed to a combination of factors: diminishing inflation rates and a favorable equilibrium between demand and supply.

“We still think the fundamentals support a further drop in yields, but the pace of decline is likely to be more gradual from here,” Bhargava said.

Given the ample liquidity within the system, the shorter end of the curve is expected to maintain strong support.

The post RBI turns neutral after sharp rate cut; ING expects another easing later this year appeared first on Invezz

0 comment
0
FacebookTwitterPinterestEmail

previous post
Trump not interested in talking to Musk: ‘Elon’s totally lost it’
next post
Top 2 private equity stocks to buy for the second half of 2025

Related Posts

Commerzbank sees China economic growth slowing in second...

June 27, 2025

JSW Paints to buy Akzo Nobel India for...

June 27, 2025

Europe markets open: stocks rise as US hints...

June 27, 2025

US-China sign trade deal, 10 more with trading...

June 27, 2025

Xiaomi stock price hits record high as Apple...

June 27, 2025

NTT Data Group plans Singapore REIT IPO in...

June 27, 2025

Jio Financial shares rally close to 5% after...

June 27, 2025

CAC 40 2025 outlook: Biggest winners and losers...

June 27, 2025

From best to worst: Why Trade Desk stock...

June 27, 2025

HBAR drops 1.63% as short bets rise and...

June 27, 2025

Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.

By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

Recent Posts

  • Despite Tariffs, Inflation Remained Low in May

    June 28, 2025
  • Despite Tariffs, Inflation Remained Low in May

    June 27, 2025
  • PBS and NPR: A Free Press Doesn’t Need a Government Budget Line 

    June 27, 2025
  • Trump v Powell: The Credibility Cost of Politicized Monetary Policy

    June 27, 2025
  • Consumer IoT Products are Priced 44% Higher on Average Than Similar Non-Connected Products

    June 27, 2025
  • Morse Micro Wi-Fi HaLow Technology Receives Matter Certification

    June 27, 2025

Editors’ Picks

  • 1

    Meta executives eligible for 200% salary bonus under new pay structure

    February 21, 2025
  • 2

    Walmart earnings preview: What to expect before Thursday’s opening bell

    February 20, 2025
  • 3

    New FBI leader Kash Patel tapped to run ATF as acting director

    February 23, 2025
  • 4

    Anthropic’s newly released Claude 3.7 Sonnet can ‘think’ as long as the user wants before giving an answer

    February 25, 2025
  • 5

    Nvidia’s investment in SoundHound wasn’t all that significant after all

    March 1, 2025
  • 6

    Elon Musk says federal employees must fill out productivity reports or resign

    February 23, 2025
  • 7

    Cramer reveals a sub-sector of technology that can withstand Trump tariffs

    March 1, 2025

Categories

  • Economy (1,643)
  • Editor's Pick (171)
  • Investing (185)
  • Stock (1,062)
  • About us
  • Contact us
  • Privacy Policy
  • Terms & Conditions

Copyright © 2025 Portfolioperformancetoday.com All Rights Reserved.

Portfolio Performance Today
  • Investing
  • Stock
  • Economy
  • Editor’s Pick
Portfolio Performance Today
  • Investing
  • Stock
  • Economy
  • Editor’s Pick
Copyright © 2025 Portfolioperformancetoday.com All Rights Reserved.

Read alsox

Is full self-driving real or just hype?...

June 9, 2025

Opera stock price analysis: more upside, but...

February 28, 2025

Allianz share price analysis: is it a...

June 20, 2025