RBI Expected To Cut Repo Rate By 25 Bps As Inflation Eases: Bank Of Baroda

(MENAFN- KNN India) New Delhi, Feb 6 (KNN) The Reserve bank of India (RBI) is likely to implement a 25 basis points reduction in the repo rate during its forthcoming monetary policy announcement on February 7, according to a recent analysis by Bank of Baroda.

This potential shift in policy stance comes as inflation, the central bank's primary concern, shows signs of moderating.

The anticipated rate cut is supported by cooling inflationary pressures, particularly evident in the declining prices of essential vegetables including tomatoes, onions, and potatoes.

The improved supply chain management of these staple commodities has helped stabilise the Consumer Price Index (CPI), creating a conducive environment for monetary easing, though any such measures are expected to be implemented gradually and with careful consideration of economic indicators.

Recent months have witnessed significant turbulence in financial markets since the RBI's last policy meeting. The Indian rupee has experienced increased volatility, primarily attributed to escalating geopolitical tensions and trade policy uncertainties.

These concerns stem largely from potential tariff disputes among major economies including the United States, Canada, Mexico, and China.

The strengthening US dollar, a consequence of these global tensions, has exerted pressure on various currencies, including the Indian rupee.

The banking sector faces its own set of challenges, with tightening liquidity conditions emerging as a significant concern.

Banks are grappling with sluggish deposit growth, even as credit growth shows signs of stabilisation. This situation has created noticeable constraints in banking sector liquidity.

The broader economic landscape presents a mixed picture, with consumption patterns predominantly driven by premium-segment products.

Corporate performance indicators from the third quarter reveal declining sales trends, suggesting potential implications for the manufacturing sector's Gross Value Added (GVA) figures.

In light of these complex economic conditions, the Bank of Baroda report indicates that while the RBI may proceed with a moderate rate cut, its approach will remain measured and data-dependent.

The central bank is expected to maintain a delicate balance between fostering growth and ensuring financial stability in its policy decisions moving forward.

(KNN Bureau)

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