Global Interest Rate Decisions: What to Expect in India, Canada, and the European Union

India's inflation trajectory is expected to remain well within the RBI's target range of 2-6%. Inflation in the Euro Area has eased to around 2.2% in March 2025.

Interest rate decisions made by central banks have a major impact on economic stability, growth, and inflation. This week, key decisions will be announced in India, Canada, and the European Union, and there’s a lot of anticipation about what we can expect. Let's take a closer look at each region’s situation, with a special focus on India.

India: A Rate Cut Likely Amid Slowing Inflation

In India, the Reserve Bank of India (RBI) is expected to announce another interest rate cut, continuing the easing cycle it started earlier this year. The RBI's decision to lower the repo rate by 25 bps to 6% in April has sparked discussions on the future path of monetary policy. The key reason for this shift is easing inflation, which has fallen to a low of 3.16% in April 2025. This marks the lowest inflation rate in India since July 2019, providing a solid foundation for further rate reductions.

India's inflation trajectory is expected to remain well within the RBI's target range of 2-6%, with food prices continuing to rise at a moderate pace. As a result, economists predict that the RBI could continue with another rate cut of 25 bps in this week’s meeting. Given the economic slowdown, with GDP growth forecasted at 6.5% for FY2025, a rate reduction will likely be seen as necessary to stimulate consumption and investment, particularly as global uncertainties weigh on the economy.

Canada: Treading Carefully After Cuts

Moving over to Canada, the Bank of Canada (BoC) has already made substantial rate cuts over the past year, bringing the benchmark interest rate down to around 3%. However, the BoC has decided to hold the rate steady in April 2025. This cautious stance comes amidst growing uncertainties, particularly trade tensions with the United States. Should these tensions escalate into a full-blown trade war, the Bank of Canada has warned that inflation could rise, and economic growth could slow even further.

Looking ahead, most analysts are expecting the BoC to maintain its wait-and-see approach before making any drastic changes. With global trade policies uncertain and domestic inflationary pressures in check, the BoC will likely remain cautious and avoid any aggressive rate cuts shortly.

European Union: Final Stages of Inflation Fight

In the European Union, the European Central Bank (ECB) is nearing the end of its interest rate easing cycle. The ECB has already reduced rates multiple times in the past year, and experts are predicting another rate cut at its meeting on June 5, 2025. Inflation in the Euro Area has eased to around 2.2% in March 2025, down from the highs seen in mid-2022. However, persistent trade tensions and global uncertainties could continue to pressure inflation, leading the ECB to remain vigilant.

Conclusion

As we await these key decisions, it’s clear that central banks are walking a fine line between controlling inflation and encouraging economic growth. In India, the RBI is expected to continue its rate-cutting cycle as inflation remains well below its target, offering some room for stimulus. In Canada and the European Union, while rate cuts have already been substantial, the economic outlook is more uncertain, and central banks are expected to proceed cautiously. These decisions will have wide-reaching implications on both domestic and global economic conditions, making them crucial for investors and consumers alike.