Is Repo Rate going to decrease? SBI estimates- Hopes increased due to reduction in inflation rate, good news may be received

There has been relief on the inflation front in the last month and it is now within the range set by the Reserve Bank of India (RBI). On the other hand, there are indications of a cut in policy rates by the Federal Reserve in the US as well. In such a situation, the central bank in India can also give a big gift by reducing the repo rate in the next MPC meeting. This expectation has been expressed by economists of the State Bank of India (SBI). Along with this, a new estimate has also been expressed about GDP growth in the SBI Ecowrap report.

Hope increased due to softening of inflation
SBI Ecowrap Report has estimated that with the softening of inflation rate, such signals are being received, due to which there is hope of relief in the repo rate in the next monetary policy meeting (MPC Meeting). Referring to the reasons behind this, economists have said in the report that the current trend of monsoon is positive for the economy. Rainfall is more than normal, whereas in the same period last year, it was seen to be less. If we talk about inflation in the country, retail inflation has come down to 3.54% on an annual basis in the month of July. This is its lowest level in 59 months, before this the inflation rate was 5.08% in the month of June. Let us tell you that earlier, retail inflation was below four percent in September-2019.

Along with retail, wholesale inflation has also reached a 3-month low. WPI was 3.36 percent in June 2024, which came down to 2.04 percent in July. According to this, now the inflation rate in the country remains within the target of 2-4 percent of the Reserve Bank of India (RBI). The effect of these positive signs can be seen in the RBI MPC meeting to be held in the month of October.

Repo rate remained unchanged for 9 consecutive times
If we talk about the repo rate, then in the last 9 MPC meetings, the policy rates have been kept unchanged, that is, no change has been made in it. At present, it remains at 6.5 percent. Earlier, when inflation in the country became uncontrollable and crossed 7 percent. Then to bring it under control, RBI had continuously increased the repo rate. It was increased several times from May 2022 to February 2023 and it increased by 2.5 percent. Now that inflation has come down even below the limit set by RBI, there is hope of a cut in it.

GDP growth expected to slow down
In the SBI Ecowrap report, along with repo rate and inflation, estimates have also been made about GDP growth. In this, economists have said that the economy may slow down in the first quarter of the financial year 2025. In the June quarter, the country’s real GDP growth may remain in the range of 7.0-7.1 percent. While Gross Value Added Growth (GVA Growth) may come down from 7 percent to around 6.7-6.8 percent.

The SBI report has cited the reason behind this as the decline in manufacturing activities. GDP growth has been estimated at 7.2 percent in the second quarter of FY25, 7.3 percent in the third quarter and 7.2 percent in the fourth quarter. It is worth noting that the government can release GDP Growth Data this week.