RBI MPC’s First Meeting of 2025: Rate Cut Expectations Amid Leadership Changes and Economic Challenges

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is expected to announce a rate cut in its February 7 meeting, with forecasts ranging from 25 to 50 basis points. The decision comes amid leadership changes at the RBI and a sharp decline in the rupee. Economic concerns, including slowed growth and inflation, add complexity to the policy review.

CONTENTS:

• RBI MPC’s First Meeting Under Governor Malhotra: Rate Cut Likely Amid Economic Slowdown
• RBI’s First MPC Meeting of 2025: Rate Cut Expectations Amid Leadership Changes and Rupee Decline
• CII President Sanjiv Puri Anticipates RBI Rate Cut, Highlights Budget’s Growth Focus and Steel Industry Concerns

RBI MPC’s First Meeting of 2025: Rate Cut Expectations Amid Leadership Changes and Economic Challenges

RBI MPC’s First Meeting Under Governor Malhotra: Rate Cut Likely Amid Economic Slowdown

RBI MPC’s First Meeting of 2025: Rate Cut Expectations The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is currently holding its meeting from February 5 to February 7, 2025, with the final policy announcement expected on Friday, February 7. This marks the first MPC meeting under the leadership of newly appointed RBI Governor Sanjay Malhotra, who took charge in December 2024.

Market expectations are high for a potential rate cut, given the recent liquidity measures introduced by the RBI. Many economists believe that a reduction in the repo rate is likely, with forecasts suggesting a 25 basis points (bps) cut to 6.25%. Some analysts even speculate that a larger 50 bps cut could be possible, though a section of experts remains cautious due to persistent inflation concerns.

The stock markets initially showed optimism ahead of the policy decision, but benchmark indices Sensex and Nifty later traded lower as investors exercised caution. Analysts are closely watching Malhotra’s policy statement for indications on future rate trajectories and how long the easing cycle might last.

Malhotra is expected to take a different approach from his predecessor, Shaktikanta Das, who maintained a hawkish stance on inflation and kept rates unchanged for two years. If a rate cut is announced, it would be the first since May 2020, aimed at boosting economic growth, which has recently slowed to a four-year low.

The final decision and policy direction will be revealed on February 7, with markets, investors, and economists keenly awaiting further clarity.

RBI’s First MPC Meeting of 2025: Rate Cut Expectations Amid Leadership Changes and Rupee Decline

RBI MPC’s First Meeting of 2025: Rate Cut Expectations The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to conclude its first policy review of 2025 on February 7 under significantly different circumstances compared to its last meeting in December 2024. Key leadership changes have taken place, with former Revenue Secretary Sanjay Malhotra taking over as RBI Governor and Deputy Governor Michael Patra, who previously oversaw monetary policy, retiring last month. With his successor yet to be named, another deputy governor is temporarily handling monetary policy, adding complexity to the review process.

Meanwhile, the Indian rupee has experienced a sharp decline, falling from 85 per U.S. dollar in December to 87 in early February. This depreciation has been partly influenced by a strengthening dollar, driven by U.S. President Donald Trump’s economic policies, which include higher tariffs on key trade partners and potential withdrawal from global tax agreements.

Calls for an interest rate cut from both industry leaders and the government remain strong, especially after economic growth slowed to 5.4% in the July-September quarter, prompting a downward revision of the full-year GDP growth estimate to 6.4%. While the Finance Ministry has attributed weak urban demand to tight monetary policy, RBI officials have suggested that boosting consumption—especially for the urban middle class—could revive private investment. With the Union Budget introducing income tax cuts to support this, the pressure is now on the central bank to respond.

Inflation, which has remained above 5% for the past five months, may have eased closer to the RBI’s 4% target in January. However, a rate cut could further weaken the rupee and drive up imported inflation. This puts Governor Malhotra in a difficult position, reminiscent of when his predecessor, Shaktikanta Das, surprised markets with a rate cut in his first policy review in 2019. As the RBI weighs its options, all eyes are on how it will balance economic growth, inflation control, and currency stability.

CII President Sanjiv Puri Anticipates RBI Rate Cut, Highlights Budget’s Growth Focus and Steel Industry Concerns

RBI MPC’s First Meeting of 2025: Rate Cut Expectations The Confederation of Indian Industry (CII) President, Sanjiv Puri, has expressed confidence that the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) will announce an interest rate cut in its upcoming meeting on February 7. He anticipates a reduction in the range of 25-50 basis points (bps), citing the RBI’s ongoing efforts to manage liquidity.

Puri also praised the recently presented Union Budget, describing it as fiscally responsible and growth-focused, particularly in its emphasis on strengthening domestic economic drivers amidst global uncertainties. He noted that the Budget aligns with CII’s policy recommendations, particularly in sectors like labour-intensive industries, consumer spending, capital expenditure (capex), and forward-looking investments. Additionally, he highlighted that improved weather conditions and better agricultural output could further stimulate consumption.

Meanwhile, Koushik Chatterjee, Executive Director and CFO of Tata Steel, spoke at the CII National Council Meet about the need to monitor tariffs on Chinese exports, given their potential effects on the global steel industry. He emphasized that India’s steel sector is competitive but must generate sufficient returns on capital. With India on a long-term growth trajectory, he stressed the importance of infrastructure and long-term capex planning to sustain industrial expansion.

Chatterjee also pointed out that many countries are currently scrutinizing China’s trade practices, and the Indian government’s response will be crucial. If safeguard duties are imposed, it could create policy stability and encourage greater investment in the steel sector.

The CII National Council Meet featured insights from key industry figures, including Rajiv Memani (CII President-Designate), R. Mukundan (CII Vice President), Chandrajit Banerjee (CII Director General), Jayant Acharya (JSW Steel Joint MD & CEO), Umesh Chowdhary (Titagarh Rail Vice Chairman & MD), and Bharat Puri (Pidilite MD).