April hike likely, but cuts to come onto agenda soon

With the turmoil in the global banking system appearing to have eased and inflation still above the RBI’s 2-6% target range, we think the MPC will push ahead with a final 25bp hike to the repo rate (to 6.75%) at the conclusion of its meeting on Thursday 6th April. But growth is set to remain relatively soft and inflation is likely to fall back within target before long. Under those circumstances, we think the RBI could lay the groundwork for cuts before the end of the year and start delivering them in early 2024, a view that the consensus has come around to.