RBI Unlikely to Cut Rates Despite US Fed Easing, Say Experts

Key Highlights

• RBI expected to focus on domestic inflation and growth before deciding on rates.

• Experts say no immediate rate cuts are priced in for the October 1 policy review.

• The US Federal Reserve reduced its benchmark rate by 25 bps to 4–4.25%.

• Fed’s move was its first cut since December and the first of Trump’s second term.

• RBI may have more space, but it remains committed to balancing inflation and growth.

Fed Rate Cut Brings Focus on Emerging Markets

The recent interest rate decision by the United States Federal Reserve has drawn global attention, especially in emerging markets such as India. On September 18, the Federal Reserve announced a 25 basis point cut, lowering its benchmark interest rate to the 4–4.25 percent range.

This reduction marked the first rate cut since December and also the first under US President Donald Trump’s second term. The move was closely watched by investors, policymakers, and economists worldwide, as it signaled a shift in the Fed’s monetary stance and opened discussions about its potential impact on other economies.

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RBI’s Stance Remains Focused on Domestic Economy

Despite the Fed’s rate cut, economists and experts believe the Reserve Bank of India (RBI) is unlikely to rush into similar action. Speaking to Moneycontrol, analysts stressed that the RBI will remain focused on domestic factors such as inflation trends and growth numbers when deciding its next course of action.

Dhiraj Nim, economist and FX strategist at ANZ Research, noted that although the Fed’s move provides the RBI with “more space,” the Indian central bank’s focus will continue to be firmly on the growth–inflation balance. This approach suggests that external influences, while important, may not be the primary drivers of RBI’s policy decisions in the near term.

October 1 Policy Review in Focus

The next monetary policy review by the RBI is scheduled for October 1, and experts anticipate that the central bank will maintain a cautious stance. Nim explained that markets would not be surprised if the RBI holds rates during this meeting, as no immediate cuts are currently priced in by traders and analysts.

The market expectation is rooted in the fact that while global cues have shifted following the Fed’s action, India’s domestic conditions, particularly inflation data, will play a more decisive role.

Market Expectations and Expert Views

Economists emphasized that the RBI is unlikely to make any hasty decisions based solely on the Fed’s policy shift. While the Fed’s easing provides additional flexibility, experts underline that India’s central bank is guided more by domestic economic indicators.

According to Nim, holding steady on interest rates would align with the central bank’s long-term strategy of balancing price stability with growth. With inflation being a critical parameter in policy formulation, the RBI is expected to evaluate incoming data before initiating any changes.

Fed’s Move and Its Global Implications

The Federal Reserve’s 25 bps cut to a 4–4.25 percent range represents a significant development for global markets. This adjustment, being the first reduction since December, also marked an important milestone under Trump’s second presidential term.

For emerging markets, the move could ease external financial conditions by reducing pressure on capital flows and currency stability. However, analysts in India insist that the RBI’s policy will not be dictated by the Fed but rather shaped by internal economic needs.

RBI’s Policy Priorities

The emphasis for the Reserve Bank of India remains on ensuring price stability while supporting economic growth. Given India’s unique domestic conditions, including inflation trends and growth metrics, the RBI is expected to remain conservative in its approach, at least in the near term.

Experts highlight that while global factors are relevant, the RBI has historically shown independence in aligning its monetary policies with local realities. This stance reflects its broader objective of shielding the economy from external shocks while ensuring sustainable growth.

Conclusion

The Federal Reserve’s decision to cut interest rates has shifted global market attention to central banks in emerging economies. However, experts stress that the Reserve Bank of India is unlikely to follow suit immediately.

With the next policy review scheduled for October 1, the central bank is expected to prioritise domestic inflation and growth numbers before making any decision. Economists agree that no immediate cuts are priced into the market, and a cautious approach is more likely.

As Dhiraj Nim of ANZ Research highlighted, while the Fed’s move may create more space for the RBI, the central bank’s attention will remain on the delicate balance between growth and inflation. This measured stance indicates that India’s monetary policy, at least in the short term, will continue to be driven by domestic priorities rather than external cues.

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