RBI MPC 2025: Central Bank Likely To Cut Repo Rate This Time? Here’s What Experts Suggest

The RBI has kept the repo rate steady at 6.5 per cent since February 2023. The last rate cut occurred in May 2020 during the pandemic, after which the rate was gradually raised to its current level

On January 27, the RBI announced measures to inject Rs 1.5 lakh crore worth of liquidity into the banking system

Source : ABPLIVE AI

The Reserve Bank of India (RBI) is expected to reduce the key interest rate by 25 basis points this week, after keeping it unchanged for two years. This move is seen as a complement to the Union Budget's initiatives aimed at boosting consumption-led demand, although concerns over the falling rupee persist.

With retail inflation remaining within the RBI’s comfort zone (below 6 per cent) for most of the year, experts suggest the central bank may act to support growth, which has been affected by sluggish consumption.

The RBI has kept the repo rate steady at 6.5 per cent since February 2023. The last rate cut occurred in May 2020 during the pandemic, after which the rate was gradually raised to its current level.

Newly appointed RBI Governor Sanjay Malhotra will chair his first Monetary Policy Committee (MPC) meeting, which started on Wednesday. The committee’s decision will be announced on Friday, February 7.

Commenting on what to expect from the policy meeting, Adhil Shetty, CEO of  BankBazaar, noted, “The rate has remained unchanged at 6.5 per cent for 11 consecutive cycles, but following the recent budget, hopes are rising that a reduction of 25 to 50 basis points could provide much-needed relief for middle-class home loan borrowers and boost confidence among prospective buyers. The RBI faces a delicate balancing act—keeping inflation under control has been a priority, which is why the repo rate has remained steady.” 

“However, with the US Federal Reserve recently announcing a 50-basis-point rate cut, there is growing anticipation that the RBI and other central banks may follow suit. For now, homebuyers continue to feel the strain, and any reduction in rates would be a welcome move to ease financial pressure, stimulate the housing market, and provide greater benefits to borrowers,” he added.

"There is a higher probability of a rate cut this time for two reasons. First, the RBI has already announced liquidity enhancement measures, which have improved conditions in the market. This appeared to be a prerequisite for cutting rates," said Madan Sabnavis, Chief Economist at Bank of Baroda.

Sabnavis also noted that the Union Budget has provided a boost to the economy, making it appropriate for the RBI to lower the repo rate in support of those efforts.

On January 27, the RBI announced measures to inject Rs 1.5 lakh crore worth of liquidity into the banking system.

"We can expect some changes in the forecast on growth in particular as the NSO had projected 6.4 per cent for the year. It would be interesting to see if the RBI would provide a forecast for growth in FY26, though this normally is published in the April policy," he added.

Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA stated that the growth-inflation dynamics have improved since the December 2025 policy meeting. "We don’t assess the fiscal stimulus provided by the Union Budget to have a significant bearing on inflation. Accordingly, we think the balance is tilted in favour of a rate cut in the February 2025 policy review," she said.