RBI Poised for Final Rate Cut Amid Easing Cycle

The Reserve Bank of India is anticipated to implement a final 0.25% repo rate cut on February 6, accompanied by liquidity injections. The decision is spurred by favorable inflation forecasts and modest growth. Despite forex interventions posing volatility, RBI aims to maintain financial stability.

The Reserve Bank of India (RBI) is gearing up to announce another 0.25% cut in the key repo rate during its upcoming monetary policy review on February 6, according to insights shared by a foreign brokerage firm. This move is expected to mark the final cut in the current easing cycle.

Bank of America economists have expressed confidence that this easing trend could continue, depending on subdued forward inflation rates and potential growth slowdowns. Amidst the economic uncertainties, the RBI seems poised to fully utilize its policy leeway to lower the repo rate to 5.25%.

In tandem with this potential rate decrease, the RBI is also expected to infuse significant liquidity into the system, providing long-term assurances regarding liquidity management. Despite ongoing forex interventions and liquidity fluctuations, experts do not see the rupee's volatility as a major deterrent to the rate-cutting trajectory.

(With inputs from agencies.)