News Desk – A major German financial firm is advising the Reserve Bank of India (RBI) to lower its key interest rates by 0.25% in their next review in February 2025. This move is suggested to help the Indian economy grow and adapt to changing financial conditions.
The firm, Deutsche Bank (DB), believes that lowering interest rates soon could prevent further economic slowdown. They predict that if the RBI starts cutting rates in February and again in April, it could bring the main interest rate down to 6% by mid-2025.
In India, it usually takes about nine months for changes in interest rates to significantly affect the economy. This is why Deutsche Bank is recommending that the RBI act quickly to reduce rates.
The urgency comes at a time when the RBI has not changed rates in the last 11 policy reviews under the former Governor, Shaktikanta Das, despite a noticeable slowdown in economic growth. Everyone is now watching to see what the new Governor, Sanjay Malhotra, will do in his first policy meeting in February.
Adding to the case for a rate cut, the United States Federal Reserve has already reduced its rates by 1% in 2024, which gives the RBI more flexibility to make a similar move.
Recent data shows that India’s inflation rate in December dropped slightly to 5.22% from 5.48% in November. Deutsche Bank expects inflation to average around 4.3% for the first half of 2025, which is lower than the RBI’s own forecast of 4.9% for the January to March quarter.
The firm also notes that the Indian rupee may face more pressure in the future, and emphasizes that RBI’s policies should balance growth and inflation carefully.
The next meeting of the RBI’s Monetary Policy Committee (MPC) is scheduled from February 5 to 7, 2025. During this meeting, the RBI will decide whether to follow the advice of cutting rates to support economic growth.
