The Monetary Policy Committee of the Reserve Bank of India is expected to keep the repo rate unchanged and maintain a neutral policy stance in its latest bi-monthly review, according to Nuvama Research.
The three-day meeting of the MPC started on Wednesday. The policy outcome is scheduled to be announced on Friday by RBI Governor Sanjay Malhotra.
In its December monetary policy meeting, the six-member committee of the RBI reduced the repo rate by 25 basis points to 5.25%. This brought the cumulative cuts to 125 basis points in 2025.
According to Nuvama Research, the central bank is expected to keep the key lending rates unchanged after cumulative easing of 125 basis points from its peak, bringing the policy repo rate down to 5.25%.
Further, the report highlights that transmission of the past rate cuts to bank lending rates is still underway, while bond yields continue to remain relatively sticky. Under this, the central bank is expected to remain focused on liquidity management, ANI reported, citing Nuvama Research.
“In the forthcoming MPC review, we reckon the RBI shall maintain status quo after cumulative easing of 125bp, bringing the repo rate to 5.25 per cent,” the Nuvama Research report said.
Also, Nuvama outlined that the recent trade deal between India and the US might help support foreign capital flows and the Indian rupee, giving the RBI leeway to manage domestic liquidity.
The report mentioned that the Indian economy seems to be bottoming out on the macroeconomic front, though the recovery is yet to become broad-based. Highlighting that growth conditions remain uneven across different sectors, the report points towards the global uncertainty, with elevated levels of market volatility.
Taking all these factors into consideration, the RBI might take a cautious, wait-and-watch approach in the near term, with the policy decisions to remain guided by evolving domestic and global conditions, the report added.
In its recent report, the Yes Bank said there is “little reason” for the RBI to move in with further cuts, with inflation likely to move higher.
“We think we have seen the last of the rate cuts in this cycle and should expect a long pause (difficult to determine the length of the pause), unless growth tends to underperform (not our base case),” said the Yes Bank report.
