Is another repo rate cut on the table as RBI MPC meets? What to expect from Friday’s policy outcome

The Reserve Bank’s rate-setting panel began its two-day deliberations on Wednesday, with markets closely watching whether borrowing costs could fall further amid supportive macro conditions and improving sentiment.The six-member Monetary Policy Committee (MPC), headed by RBI Governor Sanjay Malhotra, started discussions on the next set of bi-monthly interest rates against the backdrop of a growth-focused Union Budget and announcement of an India-US trade deal that lifted market sentiment. The policy outcome will be announced on Friday morning.According to PTI, experts are divided on the rate outlook. While some believe the central bank may opt for one more rate cut to lower borrowing costs, others expect a pause after cumulative easing in recent months.A BofA Global Research note said the RBI’s rate-cutting cycle appears to be over for now. The note added that the trade deal could strengthen growth certainty and help sustain momentum seen in high-frequency indicators.“We also believe the RBI is now done cutting rates but will continue to manage its liquidity provisions carefully to ensure rate transmission remains active,” the note said.Deepak Agrawal, CIO – Debt, Kotak Mahindra AMC, said the upcoming policy comes amid a supportive domestic macro backdrop.“With inflation well below the target, growth momentum intact, surplus system liquidity, and fiscal consolidation reaffirmed, conditions favour policy stability. While global uncertainties remain, India’s relatively strong growth dynamics, improving external position, and record foreign exchange reserves provide the MPC with ample comfort to stay on pause,” Agrawal said, PTI quoted.He added that easing tariff pressures and trade developments could support the rupee and allow the RBI to manage durable liquidity conditions.“Accordingly, the committee is expected to maintain the repo rate unchanged at 5.25 per cent; however, forward guidance is likely to remain mildly dovish, underscoring a data-dependent stance and preserving flexibility for recalibration should the growth-inflation trade-off evolve,” Agrawal said.Lokanath Panda, COO, BLS E-Services, linked policy expectations to Budget 2026’s structural reform focus and infrastructure push.“Against this backdrop, the RBI’s MPC is likely to pause its rate cuts. Having already lowered the repo rate by 125 basis points since early 2025 with the last cut in December which helped the banks interest rates reduction and increased liquidity in the market, we expect the central bank is now poised to concentrate on liquidity conditions, bond market stability, and currency risk management,” Panda said.The government has tasked the RBI with maintaining CPI-based retail inflation at 4 per cent, with a tolerance band of 2 per cent on either side. Inflation has remained below 4 per cent since February 2024 and stood at 1.33 per cent in December, while January data is due later this month.Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, said a stable rate environment could support growth and housing demand.“At this juncture, a stable interest rate environment will play a key role in reinforcing buyer confidence, sustaining housing momentum, and supporting developers in driving new launches and job creation, thereby contributing meaningfully to overall economic growth,” Kapur said.The MPC members also include Nagesh Kumar, Saugata Bhattacharya, Ram Singh, Poonam Gupta and Indranil Bhattacharyya.