RBI Updates: The two-month meeting of the RBI’s Monetary Policy Committee (MPC) began on Wednesday (February 5). This time, the MPC is expected to cut the policy rate by 0.25 per cent in the monetary policy review on Friday. If this happens, the period of the cheapness of the loan may start again.
The RBI had earlier reduced the repo rate by 0.40 per cent to 4 per cent in May 2020. The purpose was to ensure that the economy could cope with the coronavirus pandemic crisis and subsequent lockdowns. The RBI had started raising the policy rate in May 2022 in the wake of the Russia-Ukraine war and halted the hike in May 2023. Currently, the repo rate is 6.5 per cent.
Newly appointed RBI Governor Sanjay Malhotra will chair his first Monetary Policy Committee (MPC) meeting starting on Wednesday. The decision of the six-member committee will be announced on Friday, February 7. Experts are of the opinion that the current situation is favourable for the policy rate cut as it will serve as a complement to the measures announced in the Union Budget to boost consumption-driven demand growth.
A research report by SBI said that consumer price index (CPI)-based retail inflation is expected to be 4.5 per cent in the fourth quarter and average 4.8 per cent in the current financial year. It also said that inflation figures in January have remained at around 4.5 per cent.
Goldman Sachs expects 0.25 per cent cut
The prestigious Goldman Sachs believes that the RBI may cut the repo rate by 0.25 per cent. He believes that cuts are necessary due to rising global uncertainties. According to India’s economist at global financial firm Shantanu Sengupta, the future is uncertain and policymakers will need to carefully manage various economic factors.
He cited a media report that global economic changes and tariff adjustments may lead to a modest increase in inflation, but its impact on India is likely to be less than that of other countries.
What is the opinion of industry and experts?
Pradeep Agarwal, founder and chairman of Signature Global (India) Ltd, said the RBI is likely to cut the repo rate in the upcoming MPC meeting. This could be an important step in shaping India’s economic momentum. In particular, when the Union Budget 2025 is expected to boost consumption and investment. In the real estate sector, such a policy change could lead to more affordable home loans, which will improve people’s ability to buy housing and boost demand.
Golden Growth Fund (GGF) CEO Ankur Jalan believes that this is the ideal time to cut interest rates. It will play an important role in encouraging consumption and increasing economic activity in all sectors, including real estate. He said that geopolitical activities are exacerbing the challenges of major emerging market economies. In such a situation and proactive measures on the part of the RBI will save the economic prospects of the country from undue hardship.
Garvit Tiwari, director and co-founder of Gurugram-based property consulting firm Infra Mantra, says the RBI is expected to go ahead with the path shown in the budget to boost urban consumption, which has fallen. This is the 11th consecutive time that the top bank has not changed interest rates. Given India’s declining GDP growth rate, the cut in rates at the moment will help the real estate sector.
