No change expected in repo rate at next week’s RBI monetary policy committee meet, cut ‘very likely’ in Feb: Report

HDFC Bank estimates that the central Reserve Bank of India (RBI) would keep the repo rate steady at 6.5% in its final monetary policy committee (MPC) meeting of the year, to be held next week, the country’s largest private sector bank said in a report.

A rate cut is “very much possible” at the next MPC meeting in February, the report added.

“We anticipate that the RBI will maintain the current policy rate at its meeting next week, although the likelihood of a rate cut in the February policy has increased post this weaker-than-expected data,” the Mumbai-based HDFC Bank stated.

The latest Gross Domestic Product (GDP) data released on Friday showed that the GDP growth for Q2 FY25 slowed to 5.4% year-on-year, down from 6.7% in Q1.

Meanwhile, the HDFC study also projected that the rural demand is likely to recover during the second half of the fiscal year. It based its “optimism” on strong agricultural performance, payouts under government schemes, and increased government spending.

Together, these activities could spur economic activity, as per the report.

“A recovery in rural demand – driven by strong agricultural performance and government scheme payouts, along with increased government spending, is expected to drive economic activity in the second half of the (fiscal) year,” the study noted.

What happened at RBI’s previous MPC meeting?

On October 9, RBI Governor Shaktikanta Das announced that the central bank had decided to keep the key repo rate steady at 6.5%.

This meant that the repo rate, hiked to 6.5% in February 2023, stayed unchanged for the 10th consecutive time. It is the rate at which the RBI gives loans to commercial banks.

However, the RBI also changed its stance to “neutral,” an indication that a rate cut could be made in the forthcoming policies.

(With ANI inputs)