Will buying a home become cheaper, or will EMIs remain the same? What do experts say about the RBI's repo rate cut?

RBI MPC Meeting: The Reserve Bank of India's (RBI) Monetary Policy Committee meeting will be held from today, Wednesday, February 4th, to Friday, February 6th. It remains to be seen whether the repo rate will be reduced this time or not.

RBI MPC Meeting: The RBI's Monetary Policy Committee (MPC) meeting is scheduled from February 4th to 6th. It is expected that the Reserve Bank will not make any changes to the repo rate this time. Economists also believe that the committee will maintain a neutral stance, which will keep monetary conditions stable.

Experts' Views on Repo Rate Cut

Bank of Baroda's Chief Economist, Madan Sabnavis, said, "The new CPI and GDP series are expected to be released this month, which may show higher inflation and GDP growth than current levels. Therefore, it seems unlikely that the MPC will make any changes to the rates."

Brokerage house Bank of America (BofA) shares a similar view.  According to their growth outlook, the need for further repo rate cuts by the RBI MPC is diminishing. While there was scope for rate cuts to support growth, it depended on the trade deal between India and the US, which remained a major source of uncertainty for the growth outlook. Now that the deal has been finalized and is expected to boost growth certainty, the likelihood of a rate cut has decreased.

This is why BofA has currently changed its stance on a 25 basis point repo rate cut from a 'CALL' to a 'HOLD'. BofA also stated, "We believe the RBI will now pause rate cuts but will continue to carefully manage its liquidity framework to ensure that rate transmission remains effective."

When is the Repo Rate Reduced?

The RBI reduces the repo rate to support economic growth. When the repo rate is lowered, interest rates on loans decrease. This encourages investment, increases liquidity in the system, and accelerates economic activity. The possibility of a repo rate cut this time is low because the country's GDP growth (7.3 percent) is currently strong, the trade deal has provided some relief to the economy, and inflation is under control. Therefore, it is expected that the RBI will not make any changes to the repo rate.