RBI's MPC meeting begins tomorrow—experts predict another repo rate cut
What's the story
The Reserve Bank of India (RBI) will hold its bi-monthly Monetary Policy Committee (MPC) meeting from April 7-9, 2025. This will be the first such meeting for the fiscal year 2025-26.
The committee will decide on key benchmark interest rates or repo rates, with experts predicting another potential rate cut.
In February, the MPC had reduced the key benchmark interest rates by 25 basis points to 6.25%, marking the first rate cut since May 2020.
Repo rate
What is the repo rate?
The repo rate is the interest rate at which the RBI lends money to commercial banks during a fund shortage.
Commercial banks use this key borrowing rate to borrow funds for their short-term needs against government securities.
As RBI gears up for its MPC meeting, experts suggest it might reduce its repo rates for the second consecutive time under Governor Sanjay Malhotra's leadership.
Rate predictions
Economic conditions favor another repo rate cut
Bank of Baroda's Chief Economist, Madan Sabnavis, said "inflation and liquidity have settled down," which may result in a 25-basis-points rate cut in the next MPC announcement.
He also hinted at an accommodative shift, meaning more rate cuts could follow through the year.
Rating agency ICRA also predicted a 25 basis points reduction in the next announcement while keeping a "neutral stance" for India's economy.
Market response
Impact on housing and consumption
Pradeep Aggarwal, Founder and Chairman of Signature Global (India) Ltd, predicted the RBI might lower the repo rate by 25 basis points to 6%.
He believes this would boost consumption by encouraging more borrowing, especially in the housing market.
A lower repo rate usually reduces borrowing costs, spurring demand for homes and investment in real estate.
However, the actual impact will depend on how promptly commercial banks pass on these changes to consumers.