RBI Governor Sanjay Malhotra's first MPC meeting begins today, markets await rate cut

RBI MPC Meeting Updates

RBI MPC Meeting 2025: The meeting of all-new MPC under the leadership of newly appointed Governor Sanjay Malhotra begins today. Experts feel that the central bank is likely to slash the repo rate to boost the growth amid sluggish consumption trends. Many feel that the benchmark interest rate, which has remained static for the last two years, will see a reduction of 25 basis points.

Since February 2023, the central bank has kept the short-term lending rate unchanged at 6.5 percent. The last time the central bank had announced the rate cut was during the first wave of the coronavirus pandemic in May 2020. Thereafter, the interest rates witnessed a steady rise to the current level of 6.5 percent.

The verdict by the six-member committee on the rate cut will be announced on February 7, 2025. Bank of Baroda’s Chief Economist Madan Sabnavis feels that there is a greater chance of a rate cut. Sabnavis feels that the earlier decision by the central bank to inject liquidity looks like a precursor to the rate cut. He also feels that on the back of the Union Budget, the timing is right to slash key interest rate to help in boosting growth. It should be noted that last month, the RBI had announced measures to inject Rs 1.5 lakh crore of liquidity in the banking system.

Similarly, ICRA Chief Economist Aditi Nayar also thinks that the situation in conducive for the central bank to slash interest rate. Nayar feels that the inflation dynamics have improved, and the central bank has the headroom to announce the rate cut. However, Nayar also adds that the global geopolitical upheaval and volatility experienced by Indian Rupee can’t be side-lined. Nayar says that in case the Rupee further weakens then the much-anticipated reduction in repo rate maybe pushed to April, 2025.