RBI MPC 2025: Governor Sanjay Malhotra Expected To Announce Rate Cut In His First Meeting, Says Poll

Most economists surveyed by Bloomberg predict that the Reserve Bank of India will reduce the benchmark repurchase rate by at least 25 basis points to 6.25 per cent on Friday

The governor is leading an almost entirely new six-member monetary policy committee

Source : PTI

The Reserve Bank of India’s (RBI) new governor is expected to announce an interest rate cut in his first policy meeting, with a shift in focus towards stimulating economic growth amid rising global risks, according to Bloomberg’s poll. Governor Sanjay Malhotra, who took office in mid-December, is likely to move away from the hawkish stance of his predecessor, Shaktikanta Das, who maintained steady interest rates for two years while pursuing a 4 per cent inflation target.

Most economists surveyed by Bloomberg predict that the Reserve Bank of India will reduce the benchmark repurchase rate by at least 25 basis points to 6.25 per cent on Friday. Some analysts suggest there could even be a surprise 50 basis point cut.

The governor is leading an almost entirely new six-member monetary policy committee. Deputy Governor M. Rajeshwar Rao has temporarily joined the MPC to replace Michael Patra, who retired last month. Additionally, three external members became part of the committee in October.

A seasoned bureaucrat who previously served as the revenue secretary in the Ministry of Finance, Malhotra has not delivered any public speeches since his appointment, making it challenging to assess his stance on inflation and the currency. However, insiders at the RBI suggest that he prefers a more passive approach to the rupee compared to his predecessor and has expressed a readiness to let the currency weaken in line with global trends, states the report.

“Ultimately, monetary policy will have to do the heavy lifting to support growth in 2025 and beyond. Otherwise, there is a non-trivial risk of falling behind the curve,”  said Kaushik Das, chief economist for India at Deutsche Bank AG.

The RBI governor is set to announce the rate decision on Friday at 10 am.

While most economists expect the RBI to pivot this week, some, like Taimur Baig of DBS Group Holdings Ltd., believe the rate cuts will likely be modest. Others, including Sajjid Chinoy of JPMorgan Chase & Co., predict the cuts could be more gradual, in quarter-point increments, provided global financial conditions don’t deteriorate significantly, states the report.

Chinoy noted that with growth slowing to a four-year low and inflation expected to moderate to around 4.5 per cent in the next financial year, the RBI will likely be more open to cutting rates.

“With so much slack in the economy and growth below what the RBI thought, I think it clears the decks for a non-trivial amount of monetary policy easing,” he said.

A rate cut could also be accompanied by a shift in the policy stance from "neutral" to "accommodative," according to Aastha Gudwani, India’s chief economist at Barclays Plc. The RBI had adopted a neutral stance in its October policy meeting.