- विज्ञापन -
New Delhi: The Reserve Bank of India (RBI) is anticipated to lower the repo rate by 25 basis points (bps) in its monetary policy announcement scheduled for February 7, according to a report from Bank of Baroda.
The report indicated that inflation, the primary concern for monetary policy, is showing signs of moderation, prompting the RBI to consider a rate cut. It stated, “Considering all macroeconomic and geopolitical factors, we believe there is room for a 25bps rate reduction by the RBI in the upcoming policy.”
Notably, the report emphasized that inflationary pressures have eased significantly due to falling prices of essential vegetables like tomatoes, onions, and potatoes, leading to reduced price volatility in the Consumer Price Index (CPI). This scenario grants the RBI some leeway to begin lowering interest rates, although such a process is expected to be gradual and contingent on further economic data.
Since the previous monetary policy meeting, several global and domestic factors have impacted financial markets. A significant development has been the rising volatility in asset markets, particularly affecting the Indian rupee, which the report attributes to increasing geopolitical tensions and trade policy concerns, particularly the potential for tariffs between major economies like the United States, Canada, Mexico, and China. The US dollar’s strength due to these geopolitical issues has put pressure on global currencies, including the rupee.
Furthermore, domestic liquidity conditions have tightened, with banks experiencing pressure from slower deposit growth. While credit growth is stabilizing, liquidity constraints in the banking sector have become apparent.
The report also mentioned that domestic economic growth is uneven, with consumption trends largely driven by more expensive goods. Corporate financial results for the third quarter of the fiscal year indicate a sales slowdown, pointing to a tough business environment likely to affect the Gross Value Added (GVA) of the manufacturing sector.
In light of these economic conditions, the report suggests that the RBI may choose a cautious approach with a moderate rate cut, aiming to support growth while ensuring financial stability, emphasizing that future decisions will remain data-driven.
