Repo rate may be cut for the first time in five years; RBI MPC meeting from February 5, decision to come on February 7

New Delhi| RBI may cut the repo rate for the first time in five years. Analysts believe the central bank could decide this in an announcement scheduled for Feb. 7. There has been no change in the repo rate for two years and it remains the same. The key policy rate was last cut in May, 2020.

The Monetary Policy Committee (MPC) of RBI will meet from 5-7 February. Analysts believe that the central bank may decide to reduce the repo rate to boost consumption-based demand. However, the fall in rupee remains a concern. Rupee has fallen below 87. Retail inflation has remained within the RBI’s target of 6 per cent for most of the past year. In such a situation, the repo rate may be cut to boost economic growth affected by sluggish consumption.

Emphasis on measures to increase cash
Madan Sabnavis, Chief Economist of Bank of Baroda, said, this time the rate is likely to decline due to two reasons. First, the market situation has improved due to RBI’s announcement of cash increase measures. On 27 January, cash worth Rs 1.5 lakh crore has been announced to be injected into the banking system. This was also a condition for cutting rates. Secondly, the budget has given incentives and it may be appropriate to reduce the repo rate to support it. We can expect a change in the forecast for growth as the National Statistical Office estimated GDP growth at 6.4%.

The policy rate has remained stable at 6.5% for two years
ICRA Chief Economist Aditi Nair said, we believe that this time the upper hand is tilted in favor of cutting the repo rate. RBI has kept the repo rate unchanged at 6.5 percent since February, 2023. In order to provide relief during the time of Corona, the rates were continuously reduced and then it was gradually increased to 6.5 percent. New Governor Sanjay Malhotra will chair his first MPC meeting.