Overview

• The Monetary Policy Committee held the repo rate at 5.50% after implementing 100 basis points of cuts since February.
• Consumer price inflation eased to 1.55% in July, the lowest since 2017 and well below the RBI’s 2–6% target, creating technical room for further cuts.
• The RBI adopted a neutral stance, stating that future rate decisions will hinge on incoming GDP data and shifts in global interest rates.
• Ample liquidity and a scheduled cash reserve ratio reduction next month are expected to support transmission of the current easing cycle into borrowing costs.
• Corporate bonds in the 2–4 year segment are offering spreads of 65–75 basis points over government bonds and could see compression if easing resumes.