The Monetary Policy Committee meeting chaired by Reserve Bank of India governor Sanjay Malhotra began on February 5th and concludes on February 7th when the committee is expected to announce its decision regarding the repo rate, based on their discussions of various macroeconomic indicators of the country.

Economists and experts anticipate a repo rate cut to push consumption and promote growth, which was also the central theme of the Union Budget 2025. Repo rate is the interest rate at which the RBI lends money to commercial banks.  It is being widely expected that the RBI will cut the repo rate by 25 basis points – its first rate reduction in 5 years. The last time that the MPC cut rates was in 2020 amid the Covid-19 pandemic. Since May 2022, the RBI hiked the repo rate in the wake of the Russia-Ukraine war and only paused in February 2023, keeping the repo rate of 6.5 per cent unchanged since then.

There are several supporting factors this time around for trimming the repo rate. According to an SBI analysis, the retail inflation based on the consumer price index is likely to decrease to 4.5 per cent in the fourth quarter. For the whole year, inflation may come in at 4.9 per cent. This shows moderation since October when inflation rose to 6.2 per cent. The figure is now well within the RBI’s tolerance band of 4+/-2 per cent. With strong fundamentals and policy push toward growth and consumption, it is expected that the RBI will align its efforts with the administration’s. SBI says, in its analysis, that it anticipates two successive rate cuts over the policy cycles of February and April 2025. Another round of cuts can be expected around October 2025.