Interest rate cut 'off the table' in FY24-25 in India: Morgan Stanley

An interest rate cut by RBI is "off the table" in the financial year 2024-25, Morgan Stanley analysts remarked on Tuesday, as reported by Reuters.

Analysts attributed this to a potential delay in rate cuts by the Federal Reserve due to strong jobs and inflation data. As per the report, the strong growth in the Asian region is another factor that may delay the rate cut in India, Indonesia, Korea, Phillipens and Thailand.

"We believe that improving productivity growth, rising investment rate, and inflation tracking above the target of 4%, alongside a higher terminal Fed funds rate, warrant higher real rates," economists Upasana Chachra and Bani Gambhir wrote.

The Monetary Policy Committee settled down with keeping the repo rate, the key rate to tackle inflation unchanged and 6.5% for the seventh time in a row earlier in April. RBI, the central bank has an inflation target of 4% and aims to soon align with it.

Morgan Stanley believed that sustained growth and current positive outcomes could push a rate cut further ahead.

Meanwhile, for the US Morgan Stanley predicts a delay in the cut with the first one expected to be somewhere around June. It sees a total of 75 bps of U.S. rate cuts in 2024 and a shallower cycle next year.