India's Central Bank Expected to Cut Interest Rates at First Policy Meeting

Key Points:

* New RBI Governor Sanjay Malhotra anticipated to shift focus towards boosting economic growth.
* Majority of economists project a benchmark repurchase rate reduction of at least 25 basis points.
* Malhotra's monetary policy approach anticipated to be more hands-off regarding the rupee.

Policy Meeting Expectations:

Rate Trajectory:

* Malhotra's statement and press conference to reveal commitment to reducing inflation to 4% target.
* Analysts to scrutinize hints on the duration and depth of any easing cycle.

Rupee Slump:

* Malhotra's comments on the rupee to indicate tolerance for increased volatility.
* RBI's general stance of intervening to manage volatility remains, but no specific target expected.

Other Considerations:

Bonds and Liquidity:

* Swap rates fully priced in quarter-point rate cut.
* Additional cash infusion required to support lending rates.

Global Context:

* Recent economic slowdown and US tariff threats provide justification for rate cut.

Background:

* Malhotra replaced Shaktikanta Das as RBI Governor in December 2023.
* Das maintained stable interest rates for two years, prioritizing inflation control.
* Malhotra brings a fresh perspective and a willingness to foster economic growth.