RBI Easing Policies: SBI Report Signals Shift Towards Accommodative Stance
Mumbai (Maharashtra), [India], April 10 (ANI): The Reserve Bank of India (RBI) has adopted a more accommodating position regarding its monetary policy due to indications that inflationary pressures may be subsiding.
As per a recent report by the State Bank of India ( SBI The central bank's choices are shaped not just by historical inflation patterns but also by anticipated future developments.
The statement reads: "We investigate if alterations in the Reserve Bank of India’s monetary policy position align with fluctuations in household inflation expectations. Our hypothesis posits that the RBI adjusts its stance based on the direction of these changing inflation expectations."
The report indicated that the Reserve Bank of India has recently changed its monetary policy position from neutral to accommodating, which is supported by decreasing inflation forecasts. Families currently anticipate an inflation rate of approximately 8.9 percent over the coming quarter.
This suggests a decline in inflation expectations, leading the RBI to encourage economic growth through looser monetary policies.
SBI examined five distinct cases between 2018 and 2024 where the RBI's actions were scrutinized. Monetary Policy The Monetary Policy Committee (MPC) altered its position, noting that such modifications frequently corresponded with distinct alterations in households' expected inflation rates.
For example, as inflation expectations increased, the RBI adopted a more stringent approach. On the contrary, when these expectations decreased, the central bank loosened or standardized its policies. This trend indicates that the RBI is taking preemptive measures, aiming to address potential future threats instead of merely responding to present conditions.
The report further emphasized that stabilizing inflation expectations is crucial for maintaining price stability, consistent with prevailing worldwide economic views.
Regarding interest rates, the situation is as follows: SBI The report indicates that a cumulative reduction of 50 basis points (bps) has been implemented in the policy interest rates since February 2025. After the Reserve Bank of India (RBI) decreased the repo rate by 25 bps in February, public sector banks slashed their deposit rates by 6 bps, whereas foreign banks lowered theirs by 15 bps.
Notably, private banks raised their deposit rates by 2 basis points, suggesting differing transmission dynamics among various banking sectors.
Even with these discrepancies, the weighted average lending rates (WALR) on new loans for public sector banks, private banks, and scheduled commercial banks have largely mirrored adjustments in the policy rate. This indicates that the general dissemination of monetary policy stays efficient and prompt.
The SBI report thus emphasizes that the RBI's policy is both responsive to real-time developments and forward-looking, aiming to balance inflation control with economic growth. (ANI)