Mumbai
The Reserve Bank of India (RBI) is expected to cut its key repo rate by 25 basis points in its August monetary policy meeting, according to a new SBI Research report released on Saturday. The report says this rate cut would be a timely step to support economic growth, especially with inflation currently staying low and global uncertainties rising.
The report argues that acting early could help boost credit growth ahead of the festive season in FY26. An early rate cut, it says, may feel like an “early Diwali” for businesses and consumers alike.
It points out that festive seasons usually lead to a surge in demand, and credit growth is even stronger when such periods follow a rate cut. The report advises against delaying policy actions, warning central banks to avoid what it calls a “Type II error”—not cutting rates due to the false belief that low inflation is temporary, only to see inflation stay low and economic slowdown worsen.
A new version of the Consumer Price Index (CPI), which gives more weight to e-commerce and less to food prices, may also help inflation figures remain below 4 per cent even in FY27, the report suggests.
It further explains that central banks have two key responsibilities—maintaining price stability and supporting growth. With the inflation outlook favourable and GDP numbers strong, the RBI has a chance to act early, it said.
The report concludes that factors like tariff shifts, festive timing, and inflation estimates for FY27 are all being considered ahead of time, giving RBI a clear window to cut rates now.