Balanced move in tough times, says Moody’s on RBI’s 25-basis point rate cut

Mumbai: The Reserve Bank of India (RBI) has done the right thing by sticking to market expectations at a time when uncertainty is high, Katrina Ell, Economic Research Director at Moody’s Analytics said on Wednesday.

She believes the central bank’s move to cut the repo rate by 25 basis points to 6 per cent and shift its policy stance to ‘accommodative’ was well-timed, especially as people do not want any more surprises right now.

“Uncertainty has a deeply negative impact on economies, and its effects are widespread. Over the past week, bond, currency, and equity markets have seen unpredictable moves due to the US government’s tariff threats,” Ell mentioned.

“In such a volatile global scenario, the RBI’s predictable response helped avoid further market instability,” she added.

In its April policy meeting, the RBI cut the benchmark interest rate as expected. All members of the Monetary Policy Committee (MPC) voted in favour of both the rate cut and the change in stance from ‘neutral’ to ‘accommodative’.

This shift signals that the central bank is open to further rate cuts in the coming months if the situation demands.

Moody’s now expects a cumulative rate cut of up to 75 basis points during the calendar year 2025. “The RBI has left the door open for more easing, depending on how economic conditions evolve,” Ell said.

Madhavi Arora, Lead Economist at Emkay Global Research, said the policy stance change reflects the RBI’s readiness to respond to global volatility.

“The response may come in the form of more rate cuts or ensuring ample liquidity in the financial system,” Arora mentioned. She also noted that uncertainty could remain a key concern going forward.

Meanwhile, the central bank’s MPC has also lowered its GDP growth forecast for 2025-26 to 6.5 per cent, down from the earlier projection of 6.7 per cent.

RBI Governor Sanjay Malhotra attributed the downgrade to rising global trade and policy uncertainties following the recent US tariff hikes.

–IANS