Mumbai, Feb 5: The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points (bps) in its upcoming Monetary Policy Committee (MPC) meeting, according to a forecast by Goldman Sachs. The global financial firm highlighted rising global uncertainties as the primary driver of the anticipated rate cut.
Santanu Sengupta, India economist at Goldman Sachs, stated that the economic outlook remains uncertain, requiring policymakers to navigate multiple challenges carefully. While global economic shifts and tariff changes could lead to a slight increase in inflation, India is expected to be less affected compared to other nations.
This MPC meeting is particularly significant, being the first since Sanjay Malhotra assumed the role of RBI Governor. It will also be the second meeting for the three external MPC members—Ram Singh, Saugata Bhattacharya, and Nagesh Kumar. Additionally, Rajeshwar Rao has been re-designated within the RBI’s monetary policy department.
The government has maintained financial flexibility for future measures, while the RBI has implemented strategic adjustments to its currency policy. Sengupta explained that in the context of an economic slowdown, a rate cut would enable the central bank to adopt an easing stance.
He further noted that the recent depreciation of the rupee is a long-overdue adjustment, describing it as a necessary macroeconomic correction. Sengupta also pointed out that the RBI is expanding its balance sheet through open market operations, which will increase reserve money growth and support economic recovery in the latter half of the year.
Monetary easing, he added, will play a vital role in maintaining India’s economic momentum.
Earlier, State Bank of India (SBI) economists had also predicted a 25 bps rate cut in the February 7 MPC meeting. An SBI Research report suggested that, with the fiscal stimulus from the 2025-26 Budget taking effect, the RBI has sufficient room for short-term rate cuts.