RBI monetary policy: Your loan EMI rates may come down? Here’s what SBI has to say

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New Delhi: The State Bank of India’s research department in its Ecowrap report said that the Reserve Bank of India is likely to slash the repo rate by the third quarter of FY25. This means that EMI rates are unlikely to come down before October-December quarter of 2024.

India’s retail inflation, which is mostly witnessing a spike in food prices, is likely to come down until July 2024. However, it is expected to reach a peak of 5.4 per cent in September 2024. After this point, retail inflation is forecast to come down and average 4.5 per cent for the full year FY25, compared to an average 5.4 per cent in FY25.

The central bank is expected to maintain its withdrawal of accommodation stance.

To be sure, India continued to attract foreign funds and eclipsed Asian markets to corner the largest share of such fund inflows in March at $4.240 billion.

This is expected to broaden in FY25 from equity to debt with the inclusion of Indian government bonds in indices operated by JPMorgan and Bloomberg.

When will US Fed slash rates?

The US is facing a conundrum where despite elevated interest rates, the job market remains robust and prices continue to remain elevated. Low unemployment rates coupled with higher job vacancy rates are expected to remain a reality for the US economy in FY25, according to SBI Ecowrap.

Based on a trend analysis, SBI predicts that the US Fed will slash the policy rate in the second quarter of FY25. As a result, India is expected to witness a rate cut in the third quarter.

How will Indian economy perform in FY25?

RBI is likely to face challenges in liquidity management in FY25 and the central bank is expected to switch to liquidity injections from liquidity withdrawals, according to the report.

However, agriculture, small and medium business, and the services sector are expected to witness a sustained pick up translating into an overall rise in deposit rates to 14.5-15 per cent and credit to 16-16.5 per cent in FY25.

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