Mumbai: On Monday,  The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) will be held from February 5 to 7, the central bank said in a statement. It will the first MPC meeting under RBI Governor Shaktikanta Das who took charge in December last year following the sudden exit of Urjit Patel.

However, With retail inflation during the October to December quarter at 2.6 per cent, the MPC is likely to change its policy stance from calibrated tightening to neutral. But many experts said that the RBI will refrain from cutting interest rates due to fiscal challenges and rising crude oil prices. In the December monetary policy review, the RBI had kept interest rates unchanged but had promised to cut them if the upside risks to the inflation do not materialise.

Given the narrative of a global slowdown, inflation is expected to remain below the RBI's target of 4 per cent in 2018-19. This gives it a room to change its monetary policy stance. However, the elevated level of core components such as health, education, household, and personal goods suggests that room to cut rates is limited. At the same time, a combination of fiscal challenges and rising oil prices make for a difficult option.

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Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans and lowers equal monthly instalments on home loans, car loans, and personal loans. The RBI will assess broader macro indicators and decide on interest rates. The current repo rate is 6.5 per cent. The RBI's decision on February 7 will be a key driver for stock markets in coming weeks.

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