RBI monetary policy: Will India’s central bank cut the repo rate now or wait? Top experts debate | Stock Market News

RBI monetary policy: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is deliberating on interest rates amid heightened uncertainty. After a Budget that focused on consumption, the market appears to have largely priced in a 25 bps rate cut. RBI Governor Sanjay Malhotra will announce the policy decision today (Friday, February 7).

Several key factors, including a visible slowdown in India’s economic growth, moderating food inflation, tighter liquidity conditions, and stock market volatility, will influence the MPC decision.

Most experts believe the central bank will bite the bullet and announce a 25 bps rate cut. However, some experts believe the central bank will consider other options to address the challenge of tighter liquidity and delay the rate cut until the next policy meeting in April.

Mint gathered insights from top brokerage firms and experts on their expectations for the RBI’s policy move. Here’s what they say:

RBI to cut repo rate by 25 bps

CareEdge Ratings

CareEdge anticipates that the MPC will reduce the policy rate by 25 bps in the upcoming meeting while retaining a neutral stance.

“Markets will be closely monitoring the statement of the newly appointed governor of the RBI, and we expect the policy statement to have a dovish undertone even while remaining cautious on the global front,” said CareEdge.

SBI Research

Experts at SBI Research expect a 25-basis point rate cut in February policy. Cumulative rate cut over the cycle could be at least 75 basis points, with two successive rate cuts over February and April 2025.

“With an intervening gap in June 2025, the second round of rate cuts could start from October 2025,” said SBI Research.

Bank of Baroda

Experts at Bank of Baroda believe there remains space for 25bps rate cut by RBI in the upcoming policy. The cumulative cut in the entire cycle could be nearly 50-75 bps.

“The underlining fiscal consolidation and softening inflation provides further headroom for RBI to focus on growth,” said Bank of Baroda.

RBI will delay rate cut

Dhiraj Relli, MD & CEO of HDFC Securities

Relli expects the RBI to cut the repo rate by 25 basis points. However, he added that this decision remains finely balanced and the central bank may instead prioritise liquidity measures and defer the rate cut to the April policy review, particularly due to mounting global uncertainties.

Relli said there are several compelling arguments in favour of a rate cut. Sluggish economic growth, the government’s advance estimates, and recent efforts to boost banking system liquidity create a strong case. Nonetheless, challenges persist.

He pointed out that inflation remains above the RBI’s medium-term target of 4 per cent, 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,” Relli said.

Amar Ambani, Executive Director, YES Securities

Ambani anticipates there may be no rate in February. He pointed out that while inflation is showing signs of easing and domestic growth requires support, global conditions remain unfavourable for a rate cut at this stage.

“With China imposing retaliatory tariffs on the US, the RBI is likely to adopt a wait-and-watch approach regarding further developments in the trade war. An immediate rate cut could widen the interest rate differential between the US and India, exerting additional pressure on the Indian rupee (INR), which has already seen significant depreciation. The inflationary impact of this depreciation is yet to fully materialise,” said Ambani.

Ambani added that the case for supporting growth will only gain traction once INR stability is ensured.

He expects the RBI to continue addressing the liquidity deficit through additional measures and sees a possibility of a shift in policy stance from the current ‘neutral’ position to ‘accommodative’.

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