NEW DELHI: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is expected to announce cutting the repo rate by 25 basis points in its first policy decision under newly the appointed governor, Sanjay Malhotra, on Friday.
Market experts believe this move aims to boost economic growth while maintaining inflation control.
A report by Bank of Baroda suggested that inflationary pressures have eased, primarily due to the dip in prices of key vegetables like tomatoes, onions, and potatoes. As the supply situation has improved, Consumer Price Index (CPI) has aslo stablised, offering the central bank some flexibility for a measured rate cut.
“Balancing and counterbalancing all macro and geopolitical factors, we believe there remains space for a 25 bps rate cut by the RBI in the upcoming policy,” the report said.
At present, the repo rate stands at 6.50 per cent and has remained unchanged for the past eleven consecutive meetings.
Back in December, the MPC voted 5-1 to keep rates steady, prioritising economic stability while monitoring inflation trends. However, the central bank did cut the cash reserve ratio (CRR) by 50 bps to 4 per cent, aiming to boost liquidity and credit growth.
While most experts anticipate a 25 bps rate cut, they are also vouching for additional liquidity measures that may be necessary to ensure smooth cash flow in the banking system.
A report by Emkay Research revealed that investors and market participants are looking for policy measures beyond a simple rate cut, amid ongoing liquidity concerns .
For the financial year 2024-25, the RBI has projected India’s real GDP growth at 7.2 per cent, while the Economic Survey estimated it at 6.4 per cent, aligning with the forecast by the National Statistical Office’s (NSO).
With these economic projections in mind, the RBI is expected to take a cautious approach to rate reductions, with future cuts dependent on evolving inflation trends and broader macroeconomic landscape.
As the MPC’s decision nears, market participants will be closely watching governor Malhotra’s stance on rate cuts, liquidity management, and any additional measures aimed at fueling India’s economic momentum.
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About The Author
I’m JP, a 26-year-old from Odisha, India 🇮🇳 and the founder of newsxbyte.com 📰. I write articles and news on a variety of topics, including business, finance 💼, and exam updates 📚. With a passion for journalism and digital content, I strive to keep my readers informed and engaged with the latest updates and insights.
