RBI MPC Meeting: RBI's new governor Sanjay Malhotra will chair the MPC meeting for the first time, The repo rate may decrease

RBI MPC Meeting: The three-day meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is starting today, 5 February 2025. This meeting will be chaired by the new RBI governor Sanjay Malhotra for the first time, who replaced former governor Shaktikanta Das in December 2024. The results of the meeting will be announced on 7 February 2025, revealing the decisions taken on interest rates.

Expectation of cut in interest rates

According to State Bank of India (SBI) Research, a total of 75 basis points can be cut in this cycle, with the next cut likely in October 2025. However, according to the ICRA report, the decision to cut interest rates may be delayed till April or June 2025. According to the report, there are signs of improvement in the Indian economy, but in view of global developments and the weakness of the rupee against the dollar, the RBI would not want to take a hasty decision.

The economy will gain momentum.

At present, India's economic growth rate is at a four-year low. Inflation has also remained above 5% consistently, although core inflation has remained stable. In the last MPC meeting held in December 2024, the cash reserve ratio (CRR) was cut by 50 basis points, making more cash available to banks.

Inflation is under control, but RBI cautious

The main goal of the Reserve Bank is to control inflation, which is necessary to maintain within the range of 2% to 6%. In December 2024, the retail inflation rate came down to 5.22%, which is within the range set by the RBI. However, RBI has raised the inflation forecast for FY 2025 from 4.5% to 4.8%, which shows the challenge of maintaining a balance between inflation and economic growth.

Market eyes on MPC decision

Experts believe that the rate cut will boost consumption and demand, especially at a time when the government has given tax exemption to the middle class. At the same time, RBI has announced to inject Rs 1.5 lakh crore of cash into the banking system and will also auction a swap of $ 5 billion. Now the market's eyes are on the announcement to be made on February 7.

(This report is based on current economic indicators and media estimates, the official announcement will be made on February 7, 2025.)