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RBI Expected to Hold Rates, Keep Neutral Stance in Upcoming MPC Review

The Reserve Bank of India is expected to keep the policy repo rate unchanged at 5.25% in its upcoming Monetary Policy Committee review. According to a Nuvama Research report, the central bank will likely maintain a neutral stance as the transmission of past rate cuts is still in progress. The RBI's focus is anticipated to shift more towards liquidity management rather than further immediate rate action. This cautious, wait-and-watch approach comes amid an uneven economic recovery and a volatile global environment.

Key Points: RBI Likely to Hold Repo Rate, Maintain Neutral Stance: Report

  • Rate hold expected at 5.25%
  • Neutral monetary policy stance likely
  • Focus shifts to liquidity management
  • Transmission of past cuts still underway
  • Growth recovery not yet broad-based
2 min read

RBI likely to hold repo rate, maintain neutral stance in upcoming MPC review: Nuvama Report

RBI's MPC is expected to keep the repo rate at 5.25% and maintain a neutral stance, focusing on liquidity management, says a Nuvama report.

"In the forthcoming MPC review, we reckon the RBI shall maintain status quo after cumulative easing of 125bp - Nuvama Report"

New Delhi, February 4

The Reserve Bank of India is expected to keep the policy repo rate unchanged and maintain a neutral stance in its forthcoming Monetary Policy Committee review, according to a report by Nuvama Research.

The report stated that the central bank is likely to remain on hold after cumulative easing of 125 basis points from the peak, which has brought the policy repo rate down to 5.25 per cent. It added that the RBI is expected to continue with a "neutral" stance in the upcoming policy review.

The RBI's MPC is scheduled to meet over three days on February 4, 5 and 6, with the policy outcome to be announced on Friday, February 6.

According to report, the transmission of past rate cuts to bank lending rates is still underway, while bond yields have remained relatively sticky. In view of this, the report said that the central bank is likely to focus more on liquidity management rather than further rate action at this stage.

"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. Transmission to bank lending rates is in progress and bond yields have been quite sticky," the report noted.

The report further highlighted that the recent trade deal between the US and India could help support foreign capital flows and the Indian rupee. This, in turn, provides the RBI with some leeway to manage domestic liquidity conditions more effectively.

On the macroeconomic front, the report observed that the Indian economy appears to be bottoming out, although the recovery has not yet become broad-based. It added that growth conditions remain uneven across sectors.

At the same time, the global environment continues to remain uncertain, with elevated levels of market volatility. Given these factors, the report said the RBI is likely to adopt a cautious, wait-and-watch approach in the near term.

"Accordingly, the RBI is likely to remain in a wait-and-watch mode," the report said, adding that policy decisions will continue to be guided by evolving domestic and global conditions.

Overall, the report suggested that while the rate easing cycle has already provided significant support, the RBI may now prefer to assess the impact of past actions and manage liquidity, rather than move towards immediate changes in policy rates.

- ANI

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Reader Comments

P
Priya S
Good to see a cautious approach. The global situation is so uncertain, it's better to wait and watch. But I really hope the transmission to lower lending rates speeds up soon for the sake of small businesses.
R
Rohit P
Neutral stance makes sense. The economy is showing some signs but recovery is not uniform. My brother's manufacturing unit is still struggling while my IT job seems stable. RBI has a tough job balancing it all.
S
Sarah B
As an expat following Indian markets, the focus on liquidity and the positive note on the US-India deal for capital flows is encouraging. Stability from the RBI is crucial for foreign investor confidence.
K
Karthik V
With bond yields being sticky, a hold was expected. But respectfully, I feel the communication could be clearer for the common person. Terms like 'liquidity management' sound technical. Can they explain what it means for my FD rates or EMI in simpler terms?
N
Nisha Z
Wait-and-watch is the best policy right now. Too many moving parts globally. Let's hope this period of stability allows the past rate cuts to finally benefit borrowers fully. 🤞

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