Synopsis
Goldman Sachs anticipates a 25 bps reduction in repo rate by RBI in the upcoming MPC meeting due to global uncertainties. This significant move follows RBI Governor Sanjay Malhotra's appointment, impacting economic momentum and inflation management in India.Key Takeaways
- Goldman Sachs predicts a 25 bps rate cut.
- Global uncertainties drive the need for this adjustment.
- First MPC meeting under Governor Sanjay Malhotra.
- India expected to handle inflation better than other nations.
- Monetary easing crucial for sustaining economic growth.
Mumbai, Feb 5 (NationPress) The Reserve Bank of India (RBI) is anticipated to lower the repo rate by 25 basis points (bps) during its forthcoming monetary policy committee (MPC) meeting, as projected by Goldman Sachs on Wednesday.
The international financial institution asserts that this reduction is essential due to escalating global uncertainties.
As stated by Santanu Sengupta, the economist for India at Goldman Sachs, the outlook remains precarious, prompting policymakers to navigate various economic elements with care.
He noted in a media report that while shifts in the global economy and tariff modifications could result in a mild uptick in inflation, India is expected to remain less impacted than many other nations.
This particular meeting of the RBI’s Monetary Policy Committee (MPC) is significant, marking the first since Sanjay Malhotra assumed the role of RBI Governor.
It also serves as the second gathering for the three external MPC members -- Ram Singh, Saugata Bhattacharya, and Nagesh Kumar.
Furthermore, Rajeshwar Rao has been re-designated within the monetary policy department.
The government has sustained financial adaptability for upcoming initiatives, while the RBI has implemented crucial changes in its currency approach. “In a time of economic downturn, this action will allow the central bank to transition towards a more accommodative stance,” he elaborated.
According to Sengupta, the recent depreciation of the rupee is a long-awaited adjustment that should have been realized sooner. “It’s a necessary macroeconomic correction,” he remarked.
“Through open market operations, the RBI is enlarging its balance sheet, which will boost reserve money growth and support the economy in the latter half of the year,” Sengupta emphasized.
He further indicated that monetary easing will be pivotal in maintaining India's economic momentum.
Previously, SBI economists had forecasted that the RBI would declare a 0.25 percent rate reduction in the MPC meeting scheduled for February 7.
As the fiscal stimulus from Budget 2025-26 unfolds, the RBI, at least in the short term, possesses the capacity for rate reductions, as per the SBI Research report.
