NewKerala.com

RBI Likely to Hold Rates Steady Amid Global Uncertainties, Says Report

The Reserve Bank of India is expected to maintain the status quo on policy rates in its upcoming decision, according to an SBI Research report. The report cites persistent hardening of government bond yields and global economic uncertainties as key factors influencing this stance. It notes that while recent trade deals have improved India's export competitiveness by lowering tariffs, the global economic environment remains stressed. The analysis also suggests the RBI may need to conduct further Open Market Operations to support liquidity amidst ongoing currency volatility.

Key Points: RBI Policy Decision: Status Quo Expected on Rates

  • RBI expected to hold rates
  • Global economic uncertainty persists
  • OMO purchases may increase
  • India-US trade deal boosts exports
  • Currency volatility remains a factor
2 min read

RBI likely to maintain status quo in upcoming policy rate decision

RBI likely to maintain policy rates amid global economic stress and currency volatility, according to an SBI Research report analysis.

"We believe that the choice of eligible securities itself may influence the effectiveness of OMO operations - SBI Research report"

New Delhi, Feb 5

The Reserve Bank of India is likely to maintain status quo in the upcoming policy decision on Friday, as despite policy rate easing, government bond yields have exhibited persistent hardening in recent periods, among other reasons.

According to economists, the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged.

"We believe that the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged," said an SBI Research report.

"RBI is thus likely to maintain status quo in the upcoming policy," it added.

Since the last policy, one of the major policy changes is the EU-India and US-India trade deal resulting in reduction in tariffs on India to 18 per cent from 50 per cent earlier.

Clearly, India has now one of the lowest tariffs among Asian countries which will help in improving our export competitiveness, said SBI Research.

However, global economy continues to remain uncertain. Our Geo-Economics Stress Index reveals heightened uncertainty leads to economic stress with a lag of 3-4 months. Elsewhere, metal prices have recovered after witnessing a significant sell-off last week, said the SBI report.

Moreover, slack in labour market, stagnant real disposable incomes alongside reduced inflationary impact might lead to US Fed rate cuts.

Against this backdrop, Indian currency see-sawed between 89-92 per dollar for the past two month and has depreciated by 5.8 per cent against USD (most amongst the major economies) since April 2 2025, when US announced sweeping tariff hikes across economies, though it appreciated significantly (more than Re 1) after the India-US trade deal reducing the tariffs to 18 per cent.

OMOs net purchase worth Rs 6.16 lakh crore has already been done and given the current global uncertainties, "we believe RBI may have to go up to Rs 50,000 crore further OMOs purchase in the remaining part of FY to support durable liquidity quest amidst credit growth," said the SBI report.

- IANS

Share this article:

Reader Comments

R
Rohit P
The trade deal reducing tariffs is a massive win! 🇮🇳 From 50% to 18% will really boost our exports. The RBI maintaining status quo makes sense to let these positive developments play out without adding new variables.
A
Aman W
I respectfully disagree with the 'prudent move' sentiment. While stability is good, the common man is still waiting for relief. Loan EMIs aren't getting cheaper. A small cut could have signaled support for growth and consumption.
S
Sarah B
The complexity of OMO operations mentioned here is fascinating. It's not just about pumping in money, but *how* you do it. The RBI's technical balancing act is crucial for managing liquidity without sparking inflation.
V
Vikram M
The rupee depreciation is worrying, yaar. 5.8% since April is significant. Glad the trade deal helped it appreciate a bit. Hope the RBI's stance and further OMOs can provide a stronger floor for the currency.
K
Karthik V
Waiting for the US Fed to cut rates first seems to be the global playbook. Once they move, maybe then we'll see more action from the RBI. For now, hold steady and focus on managing liquidity through OMOs as the report says.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50