SBI Research Predicts Another RBI Rate Cut Sooner Than You Think
Thank you for reading this post, don't forget to subscribe!SBI Research anticipates another repo rate cut by the Reserve Bank of India (RBI) in 2025, a 25 basis point (0.25%) reduction, and it could happen sooner than many expect. This comes after the RBI has already lowered the repo rate by a significant 100 basis points (1%) this year.
This potential move by the RBI would be a welcome relief for home loan borrowers, as it would further reduce their monthly EMIs or shorten their loan tenures, especially for those with repo-linked floating rate loans. Banks have been quick to pass on previous rate cuts, with many now offering home loans below the 8% mark.
Why the Anticipation?
SBI Research’s prediction hinges on a few key factors:
- Favorable Inflation Outlook: The upcoming July 2025 Consumer Price Index (CPI) inflation data is expected to hit a historic low. SBI Research projects the average CPI inflation for FY26 to be around 3.0%-3.2%, significantly lower than the RBI’s own 3.7% forecast and the 4.6% average for FY25. India’s CPI inflation already hit a 77-month low of 2.10% in June 2025, largely due to a remarkable decline in food inflation, particularly for vegetables, pulses, and spices.
- Boost for Economic Growth: The RBI’s current focus is on bolstering capital formation to ensure more sustainable economic growth. A further rate cut is seen as a crucial “adrenaline boost” for the economy, especially given global economic dynamics.
- Data-Driven Decisions: The RBI, which shifted its stance from accommodative to neutral in its last monetary policy meeting, has stated that future actions will be data-dependent. The consistently benign inflation data now strongly supports a further rate reduction.
The next RBI Monetary Policy Committee (MPC) meeting is scheduled for August, and it will be interesting to see if these predictions materialize, bringing more cheer to borrowers and further stimulating economic activity.
