RBI Watch: Tariffs would reinforce case for further easing

The recent sharp drop in headline CPI inflation means that the Reserve Bank is primed to cut the repo rate again at the conclusion of the MPC meeting on Wednesday 9th April. And barring a debilitating sell-off in the rupee, the case for monetary easing will be reinforced if India faces a high tariff on exports to the US in the wake of so-called “Liberation Day” tomorrow. We are forecasting a 25bp cut next week (to 6.00%). In total, we maintain our long-held forecast that the repo rate will fall to 5.50% in this cycle. That is still a touch more dovish than consensus expectations.