The three-day meeting of the MPC started on Wednesday.
“We expect the MPC to vote for a 25 bps rate cut in the repo rate to 6.25 per cent after an extended pause since February 2023,” DBS Group Research Senior Economist Radhika Rao said.
Another global research firm BofA Global Research also echoed similar view with regard to interest rate cut.
“Growth and inflation data both point towards the need to ease monetary conditions. As such, we expect the RBI to cut the repo rate by 25 bps to 6.25 per cent in the February MPC, potentially in a unanimous decision, and take steps to inject durable liquidity, by considering another reduction in CRR of 50 bps, or substantial bond purchases through open market operations,” BofA Global Research said. Industry chamber Assocham also said there is widespread expectations of a 25-basis point cut in the policy rate to 6.25 per cent. While food inflation is moderating, there are bright prospects for the rabi crop. Going forward to March-April, food prices should be further corrected giving elbow room for a reversal in the rate cut cycle, the chamber said.
According to an SBI research report, a 25-basis point reduction in interest rate is expected in the upcoming policy.
Bajaj Broking Research said the RBI is likely to cut repo rate by 25 basis points for the first time in almost five years after domestic rate-setting panel has kept the policy repo rate unchanged for the last 11 consecutive meetings after raising it 250 bps between May 2022 and February 2023.
It also said the RBI’s recent liquidity measures aim to stabilise the financial system, reinforcing expectations of monetary easing.
Bajaj Broking Research also said while the RBI ensures sufficient liquidity, a CRR cut is unlikely in the next policy.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution, said a rate cut by the RBI has been long anticipated, but in the last monetary policy meeting, instead of reducing the repo rate, the central bank opted to lower the cash reserve ratio (CRR).
“Given the current domestic and global economic conditions, there is strong anticipation of a repo rate cut of 25-50 basis points in the MPC meeting. A rate cut of up to 50 basis points could provide significant relief to borrowers. Currently, home loan interest rates hover between 8.5 per cent and 9 per cent per annum,” Kapoor said.
Abhishek Dev, Co-founder and CEO of Epsilon Money, said the proposal of a personal tax rebate in the Union Budget and the impending monetary policy announcement presents a strategic juncture for investors.
“As central banks balance the dual challenges of fostering growth while managing inflationary pressures, any indications of increased liquidity could further stimulate capital flows,” he said.
This interplay between fiscal stimulus and monetary policy establishes a conducive environment for businesses and investors, facilitating informed decision-making, Dev added.
Amar Ambani, Executive Director of YES Securities, however, said, “We do not anticipate the RBI cutting rates in the upcoming policy meeting”.
While inflation is showing signs of easing and domestic growth requires support, global conditions remain unfavourable for a rate cut at this stage, he said.
“In the first policy meeting under the new governor, we expect the RBI to continue addressing the liquidity deficit through additional measures. We see a possibility of a shift in policy stance from the current ‘neutral’ position to ‘accommodative’. This will offer enough reason for the Indian stock market to rejoice,” Ambani added.
Content Source: economictimes.indiatimes.com