MUMBAI- Interest rate cuts in India are “off the table” in fiscal year 2024/25 given the change in the Federal Reserve’s policy path and strong growth in the South Asian nation, analysts at Morgan Stanley said on Tuesday.
“We believe that improving productivity growth, rising investment rate, and inflation tracking above the target of 4 percent , alongside a higher terminal Fed funds rate, warrant higher real rates,” economists Upasana Chachra and Bani Gambhir wrote.
With India’s key policy rate expected to be steady at 6.5 percent in the financial year ending March 31, real rates should average 200 basis points (bps), they added.
India’s rate-setting Monetary Policy Committee kept the key repo rate unchanged for a seventh straight meeting earlier this month after having raised it by a total of 250 basis points between May 2022 and February 2023.
The central bank seeks to ensure inflation aligns durably and sustainably to its 4 percent target.
