RBI likely to hold rates steady in August, but more cuts may be on the horizon: Nuvama
ADVERTISEMENT After a surprise front-loading of a 50 basis points rate cut and a shift to a 'neutral' stance in the last policy, the central bank appears to be signalling limited room for further easing.
However, Nuvama believes the case for more rate cuts remains strong.
The report underlines that domestic economic activity has visibly slowed in recent quarters. 'Corporates are contending with subdued revenue and profit growth, which in turn is inhibiting capex,' Nuvama noted.Simultaneously, households are facing weaker income growth and a deceleration in loan growth, dampening consumption demand.
ADVERTISEMENT Adding to the concerns, government expenditure is unlikely to provide a significant boost, while tax revenues have slipped below the 10% year-on-year mark. External demand also appears fragile amid global trade tensions.Consequently, several economic indicators — including credit growth, exports, auto sales, real estate transactions, and corporate profits — have decelerated to single-digit growth, resembling pre-pandemic patterns.
ADVERTISEMENT On the inflation front, the report highlights a benign landscape. Headline Consumer Price Index (CPI) inflation is near a six-year low, and core CPI (excluding volatile items) has remained below 4% for an extended period. 'Corporate commentary also suggests a lack of pricing power in the economy,' Nuvama stated.Additionally, the global macro backdrop, marked by narrowing US trade deficits and export redirection by surplus nations like China, is expected to remain deflationary.
ADVERTISEMENT
Given the current mix of benign inflation and weakening growth, the Nuvama report argues for further monetary easing down the line. Although the RBI is expected to hold rates steady for now, the possibility of returning to an 'accommodative' stance cannot be ruled out if inflation continues to undershoot expectations.'Systemic liquidity is ample and may remain so, and monetary transmission is progressing well,' the report added, suggesting that RBI has room to maneuver if conditions deteriorate.
ADVERTISEMENT
Nuvama also expects global central banks, particularly the US Federal Reserve, to resume rate cuts later this year. This could create further headroom for the RBI to follow suit, especially as fiscal policy in India remains broadly neutral to contractionary.All eyes will be on the RBI's forward guidance, which could offer clues about a potential shift back to an easing bias.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
(You can now subscribe to our ETMarkets WhatsApp channel)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
an hour ago
- Economic Times
Rupee closes at a record low for the third straight day at 87.80/$
The Indian rupee extended losses for a third consecutive session on Tuesday, closing at a fresh record low of 87.80 per dollar. ADVERTISEMENT The persistent weakness reflects sustained dollar demand from oil companies and importers, coupled with continued foreign portfolio investor (FPI) outflows from Indian equities, triggered by heightened trade tensions after US President Donald Trump threatened increased tariffs on Indian goods. The local currency closed 15 paise lower compared to Monday's close of 87.65 Ahead of the market open, the rupee traded weaker near 88 per dollar in offshore non-deliverable forwards (NDF). However, intervention by the Reserve Bank of India, through dollar sales, provided some support, enabling the currency to open firmer at 87.85. Despite this, the rupee slipped to an intraday low of 87.88, narrowly missing its all-time low of 87.95 recorded in February, according to LSEG said that the threat of rupee falling past the all-time low and crossing the 88 to a dollar-mark persists, given Trump's commentary of slapping higher tariffs on India for buying Russian oil.'US President Donald Trump's persistent tariff threats on India, outflows from domestic equity markets, panic buying by importers and DXY unable to find a clear direction are all adding to pressure on the rupee. Oil demand has been seen as well pushing the USDINR pair weaker,' said Kunal Sodhani, head of FX and rates treasury at Shinhan Bank India. ADVERTISEMENT The dollar index was down 0.3% at 98.96 on Tuesday, LSEG data showed. U.S. President Donald Trump on Monday again threatened to substantially raise tariffs on Indian goods, citing the country's continued purchases and resale of Russian oil, after announcing a surprise 25% tariff on Indian imports last response, India's foreign ministry said it would take 'all necessary steps' to protect national interests and economic security, escalating a trade row between the two countries. ADVERTISEMENT Traders would now be looking at RBIs rate decision due on Wednesday, where some participants expect a rate cut, but the majority expect a pause, according to an ET poll. For Wednesday, the rupee is expected to trade in the range of 87.50 to 88.25, traders said. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
an hour ago
- Time of India
Nabard, RBI promote rural financial literacy; 2,421 centres set up for financial literacy: MoS
National Bank for Agriculture and Rural Development ( Nabard ) and Reserve Bank of India ( RBI ) have undertaken various interventions to promote financial literacy and awareness of rural population , including microfinance borrowers , Parliament was informed on Tuesday. Nabard has been providing financial support to conduct financial and digital literacy camps through rural bank branches and financial literacy centres (FLCs) in areas with limited awareness, Minister of State for Finance Pankaj Chaudhary said in a written reply in the Rajya Sabha. Productivity Tool Zero to Hero in Microsoft Excel: Complete Excel guide By Metla Sudha Sekhar View Program Finance Introduction to Technical Analysis & Candlestick Theory By Dinesh Nagpal View Program Finance Financial Literacy i e Lets Crack the Billionaire Code By CA Rahul Gupta View Program Digital Marketing Digital Marketing Masterclass by Neil Patel By Neil Patel View Program Finance Technical Analysis Demystified- A Complete Guide to Trading By Kunal Patel View Program Productivity Tool Excel Essentials to Expert: Your Complete Guide By Study at home View Program Artificial Intelligence AI For Business Professionals Batch 2 By Ansh Mehra View Program These programmes entail generating awareness on various banking products, social security schemes of Government of India, digital banking, mobile banking, cyber security, etc, he said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Pierce Brosnan's Wife Lost 120 Pounds - This Is Her Now Undo " Centre for Financial Literacy (CFL) Project has been initiated by RBI since 2017 with an objective to adopt community-led innovative and participatory approaches to financial literacy. A total of 2,421 CFLs have been set up across the country as on March 31, 2025 with one CFL covering three blocks on an average," he said. Nabard also sponsors village-level programmes, which are conducted with the support of banks and State Rural Livelihoods Missions (SRLMs) for a better interface between bankers and self-help groups (SHGs) to facilitate opening of SHG accounts, their credit linkage and regular loan repayments, thereby facilitating financial inclusion at the village level, he said.
Time of India
an hour ago
- Time of India
Rupee closes at a record low for the third straight day at 87.80/$
The Indian rupee extended losses for a third consecutive session on Tuesday, closing at a fresh record low of 87.80 per dollar. The persistent weakness reflects sustained dollar demand from oil companies and importers, coupled with continued foreign portfolio investor (FPI) outflows from Indian equities , triggered by heightened trade tensions after US President Donald Trump threatened increased tariffs on Indian goods. Productivity Tool Zero to Hero in Microsoft Excel: Complete Excel guide By Metla Sudha Sekhar View Program Finance Introduction to Technical Analysis & Candlestick Theory By Dinesh Nagpal View Program Finance Financial Literacy i e Lets Crack the Billionaire Code By CA Rahul Gupta View Program Digital Marketing Digital Marketing Masterclass by Neil Patel By Neil Patel View Program Finance Technical Analysis Demystified- A Complete Guide to Trading By Kunal Patel View Program Productivity Tool Excel Essentials to Expert: Your Complete Guide By Study at home View Program Artificial Intelligence AI For Business Professionals Batch 2 By Ansh Mehra View Program The local currency closed 15 paise lower compared to Monday's close of 87.65 Ahead of the market open, the rupee traded weaker near 88 per dollar in offshore non-deliverable forwards (NDF). However, intervention by the Reserve Bank of India, through dollar sales, provided some support, enabling the currency to open firmer at 87.85. Despite this, the rupee slipped to an intraday low of 87.88, narrowly missing its all-time low of 87.95 recorded in February, according to LSEG data. Dealers said that the threat of rupee falling past the all-time low and crossing the 88 to a dollar-mark persists, given Trump's commentary of slapping higher tariffs on India for buying Russian oil. Live Events 'US President Donald Trump's persistent tariff threats on India, outflows from domestic equity markets, panic buying by importers and DXY unable to find a clear direction are all adding to pressure on the rupee. Oil demand has been seen as well pushing the USDINR pair weaker,' said Kunal Sodhani, head of FX and rates treasury at Shinhan Bank India. The dollar index was down 0.3% at 98.96 on Tuesday, LSEG data showed. U.S. President Donald Trump on Monday again threatened to substantially raise tariffs on Indian goods, citing the country's continued purchases and resale of Russian oil, after announcing a surprise 25% tariff on Indian imports last week. In response, India's foreign ministry said it would take 'all necessary steps' to protect national interests and economic security, escalating a trade row between the two countries. Traders would now be looking at RBIs rate decision due on Wednesday, where some participants expect a rate cut, but the majority expect a pause, according to an ET poll. For Wednesday, the rupee is expected to trade in the range of 87.50 to 88.25, traders said.
