In a significant development for India’s economic landscape, leading economists anticipate a potential rate cut in the upcoming Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting. The meeting, scheduled for February 7-9, has gained heightened attention amid moderating inflation and concerns over economic growth.
Analysts believe the RBI may lower the repo rate by 25 basis points in response to easing inflationary pressures and sluggish private investment. With the Consumer Price Index (CPI) showing signs of stability, experts argue that the central bank could shift its focus from controlling inflation to supporting economic expansion.
Mr. Dhiraj Relli, MD & CEO of HDFC Securities, stated,
At the upcoming Monetary Policy Committee (MPC) meeting, led by Governor Malhotra, the Reserve Bank of India (RBI) is widely expected to cut the repo rate by 25 basis points. However, this decision remains finely balanced. The central bank may instead prioritize liquidity measures and defer the rate cut to the April policy review, particularly in light of mounting global uncertainties.
There are several compelling arguments in favor of a rate cut. Sluggish economic growth, the government’s advance estimates, and recent efforts to boost banking system liquidity create a strong case. Just last week, the RBI announced plans to inject ₹1.5 lakh crore into the banking system, following a December infusion of ₹1.16 lakh crore through a 50 basis point reduction in the cash reserve ratio”.
He added, Nonetheless, challenges persist. Inflation remains above the RBI’s medium-term target of 4%, and increasing global trade-related uncertainties have added complexity to the economic outlook. The government’s fiscal prudence, reflected in the recently announced Union Budget, points toward a downward trajectory for interest rates. While the broader direction seems clear, the precise timing of the next rate cut remains uncertain.
The repo rate has remained unchanged at 6.50% since February 2023, as the central bank maintained a cautious stance amid global economic uncertainties. However, with the U.S. Federal Reserve signaling possible rate cuts in 2025, India’s central bank may find room to ease monetary policy.
Stay tuned for further updates on this developing story.
