NEW DELHI: The Reserve Bank of India (RBI) will announce its first monetary policy under new Governor Sanjay Malhotra on Friday, February 7, 2025.. Experts believe the central bank might lower the repo rate by 25 basis points (bps) to support economic growth while keeping inflation in check.

A report from the Bank of Baroda says inflation has come down because vegetable prices, like tomatoes, onions, and potatoes, have dropped. With supply improving, the Consumer Price Index (CPI) has become more stable, allowing the RBI some space to cut rates.

Currently, the repo rate is 6.50 percent. The RBI has kept it the same for the last 11 meetings. In December, the Monetary Policy Committee (MPC) decided to keep the rate unchanged with a 5-1 vote. However, the RBI did lower the Cash Reserve Ratio (CRR) by 50 base point to 4 percent  to boost liquidity and credit growth.

While a 25 bps rate cut is expected, analysts say more steps may be needed to ensure enough cash flow in the banking system. A report by Emkay Research notes that investors want more than just a rate cut, as liquidity remains a concern.

For 2024-25, the RBI expects India’s economy to grow by 7.2 percent , while the Economic Survey predicts 6.4 percent  growth, similar to estimates from the National Statistical Office (NSO).

With these factors in mind, the RBI is likely to take a careful approach. Any future rate cuts will depend on inflation and overall economic conditions. Investors will be watching closely to see how Governor Malhotra handles rate cuts, liquidity, and other policies to keep India’s economy strong.

Lookback RBI Repo cut:

The Reserve Bank of India has kept the repo rate steady at 6.5 percent for the last eleven meetings in a row. In the December meeting, the Monetary Policy Committee voted 5-1 to keep the rate unchanged. Their main goal was to maintain stability while keeping a close watch on inflation. In addition, the December policy included a 50-base point reduction in the Cash Reserve Ratio, bringing it down to 4 percent, aimed at enhancing liquidity as well as supporting credit growth.