RBI Monetary Policy (7-Feb-2025): Key Expectations, Rate Cut Possibility & Market Impact

The Reserve Bank of India (RBI) is set to announce its monetary policy decision, with markets keenly watching for a potential rate cut. The new RBI Governor, Sanjay Malhotra, has taken charge, and expectations are high regarding his policy direction.

Key Factors to Watch:

1. Interest Rate Decision – Will RBI cut rates? If so, by 25 basis points, which is the most likely scenario.
2. Policy Stance – Whether RBI will shift from its current stance to a more accommodative approach.
3. Economic Forecasts – Updates on GDP growth projections and inflation estimates, which influence market sentiment.
4. Liquidity Measures – RBI’s actions to address liquidity crunch, including previous ₹1.5 lakh crore infusion into the market.
5. Unsecured Loans Issue – RBI’s concerns over rising unsecured lending, which could lead to stricter regulations.

Market Reactions & Government’s Role:

• The government has also taken steps to boost liquidity, such as the income tax exemption up to ₹12 lakh, aiming to increase consumer spending.
• A rate cut could inject further liquidity, positively impacting the bond market and stock indices.
• However, if RBI delivers a rate cut with cautious commentary, markets may react negatively.

The 10 AM announcement will be crucial for investors, with direct implications for stock markets, foreign investments, and overall economic growth. The press conference and governor’s commentary will provide deeper insights into future monetary policy actions.