The weakening of the US dollar has opened the door for the Reserve Bank of India (RBI) to reduce interest rates further by up to 75 basis points (bps) by the end of 2025, according to global financial services firm Jefferies.
The report suggests that emerging markets, including India and Indonesia, are now in a favorable position to ease monetary policy due to a more accommodative global currency environment. “US dollar weakness has created real room to cut rates for both Bank Indonesia and the Reserve Bank of India,” Jefferies noted.
India’s declining inflation trend strengthens the case for monetary easing. Consumer price inflation averaged 4.6% in the previous fiscal year and fell to 3.2% in April 2025—its lowest since July 2023—fuelling expectations of further rate cuts.
Since taking over as RBI Governor in December 2024, Sanjay Malhotra has already overseen a 50-bps reduction in the repo rate, replacing his predecessor Shaktikanta Das. Malhotra is viewed as more dovish, and market analysts interpret the falling inflation trend as supportive of equities and overall economic momentum under his leadership.
In its recent Annual Report, the RBI projected average inflation around 4% for the current fiscal year ending March 2026. However, Jefferies’ India unit believes that if current economic and currency dynamics continue, the RBI has the scope to implement an additional 75-bps rate cut by the end of calendar year 2025.
Such a move could potentially stimulate domestic growth, enhance the investment environment, and support market sentiment. In April, the RBI’s Monetary Policy Committee (MPC) had already reduced the repo rate by 25 bps—from 6.25% to 6%—signalling a shift toward a more accommodative policy stance.
