RBI expected to hold rates, watch data

Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is likely to remain in a wait-and-watch mode when its bi-monthly meeting concludes on February 6.

With GDP growth expected to moderate modestly, while potential growth continues to be supported by sustained public-sector capital expenditure and a boost from two major trade agreements, the monetary policy outlook remains balanced.Speaking toBizz Buzz, Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group, said, “A calibrated uptick in retail inflation further limits the case for near-term easing. In this context, the MPC is likely to stay in wait-and-watch mode, keeping the repo rate on hold, as the RBI’s room for additional cuts remains constrained.” Instead, the policy focus is expected to shift towards liquidity management and yield-curve stability, especially in light of the govt’s Rs17.2 trillion gross borrowing programme. With inflation well below the target, growth momentum intact, surplus system liquidity, and fiscal consolidation reaffirmed, conditions favour policy stability.

While global uncertainties persist, India’s relatively strong growth dynamics, improving external position, and record foreign exchange reserves provide the MPC with ample comfort to stay on pause. Deepak Agrawal, CIO–Debt, Kotak Mahindra AMC, said, “Accordingly, the committee is expected to maintain the repo rate unchanged at 5.25%.”