RBI may cut repo rate by 25 bps

Eyeing Tailwinds | What economists expect in the RBI MPC meet scheduled for Feb 5-7

- ANJALI KUMARI

With the Union Budget announcing measures to support consumption while maintaining fiscal discipline, the ball is now in the central bank's court to stimulate sluggish economic growth.

The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) is expected to reduce the policy repo rate for the first time in almost five years, according to all respondents except Yes Bank in a Business Standard poll of 10 participants. The respondents anticipate a 25-basis-point (bp) rate cut.

The RBI will announce its policy review on February 7. The domestic rate-setting panel has kept the policy repo rate unchanged for the last 11 consecutive meetings after raising it by 250 bps between May 2022 and February 2023. The last rate cut was in May 2020, during the Covid-19 pandemic.

A rate cut is likely due to weak growth, expectations of declining inflation, and fiscal prudence demonstrated in the Budget. Gross domestic product (GDP) growth fell to a seven-quarter low of 5.4 per cent in the July-September period of 2024-25.