RBI's Rate Cut Stands Out Globally Amid Strong GDP & Low Inflation: SBI Research

(MENAFN- KNN India) New Delhi, Dec 6 (KNN) SBI Research has described the Reserve Bank of India's decision to cut the policy repo rate by 25 basis points as an exceptional move, noting that the easing comes despite one of the most favourable macroeconomic backdrops in recent years.

Unusual Easing Under Strong Conditions

The research report said the rate cut stands out globally, as central banks rarely ease policy when growth and inflation conditions are congenial, reported ANI.

India's GDP expanded 8.2 per cent in the July–September 2025 quarter, while retail inflation fell to 0.25 per cent in October.

SBI Research cited limited historical parallels, pointing to episodes in the UK, China and Indonesia. In most cases, it noted, rate cuts abroad occurred when interest rates and inflation were significantly higher.

The report urged financial markets to respond with maturity to the rate reduction and avoid excessive optimism.

Sharp Revision in Inflation Outlook

According to SBI Research, supportive food price trends, strong kharif output, healthy rabi sowing, favourable reservoir levels and adequate soil moisture have enabled the RBI to substantially lower its inflation projection for 2025–26 to 2.0 per cent.

The central bank had earlier forecast inflation at 2.6 per cent in October and 4.2 per cent in February.

SBI Research now expects inflation to average 1.8 per cent in FY26 and 3.4 per cent in FY27.

Growth Projections Strengthened

The RBI has also raised its growth outlook, projecting real GDP expansion of 7.3 per cent in 2025–26. Growth for the first two quarters of 2026–27 is estimated at 6.7 per cent and 6.8 per cent, respectively.

Even as domestic indicators remain strong, the report cautioned that global uncertainties - including shifting tariff regimes, geopolitical tensions and financial market volatility - could soften external demand.

Nevertheless, SBI Research expects India to record growth above 7 per cent in both Q3 and Q4 of this fiscal year, with full-year GDP likely at 7.6 per cent.

(KNN Bureau)

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