RBI To Go For Four Rate Cuts Against Fed's Dozen By Mid-2026, Says Pace 360's Goel

The Reserve Bank of India may go for four rate cuts over the next two years as compared to the United States Federal Reserve’s 12 during the same period, according to Amit Goel, co-founder and chief global strategist of Pace 360.

Goel told NDTV Profit that the RBI does not have the leeway that the US Fed enjoys. “We must bear in mind that the repo rates in India went up by only 200 bps (basis points) while the US Fed took it up by 525 bps,” he said.

Central banks across the world have increased their repo rates to control inflation, following significant rate cuts during the Covid-19 pandemic. However, RBI kept its repo rate unchanged to 6.5% for the eighth time in a row in August.

“We expect the Fed fund rates to come down to 2%. So, we are looking at a reduction of almost 300 bps to 325 bps by 2026. I doubt that RBI would go below 5.5%. So, we are looking at four rate cuts in India for about 12 rate cuts in the US over the next two years,” Goel predicted.

The senior analyst said that he expected the repo rate to come down to about 6% by April–May 2025. “By mid-2026, we expect the RBI repo rate to be around 5.5%, but not much below that,” he said.

Goel’s prediction comes at a time when markets across the world are looking at an imminent Fed rate cut announcement on Sept. 18. He was of the opinion that the US central bank will go for a 25 bps rate cut this month.

“While the recent data is very suggestive that the Fed would have to get aggressive at some point of time in the next few months, I think it would probably gravitate towards a 25 bps cut,” he said. 

He felt that the Fed would be with a 25 bps rate cut. Then, for another few weeks, it will observe how things go "and then, maybe at some stage in the next few months, we will get a 50 bps cut.”

“We are expecting about four rate cuts by March 2025 and by October 2025, the Fed will be a lot more aggressive in rate cutting because the US could get into a recession sometime in the middle of next year,” he said.

Goel’s prediction was in alignment with those by most analysts, who believe that the Fed will go for a 25 bps rate cut during its upcoming meeting. He said that by October next year, the regulator may go for a total of 150 bps to 250 bps rate cuts if there is a negative GDP reading or jobs data in a particular month.