RBI's Monetary Dilemma: To Cut or Hold?

The Reserve Bank of India's Monetary Policy Committee (MPC) is gearing up for another pivotal meeting amidst a backdrop of favorable economic conditions. With inflation rates at a low, a growth-centric Union Budget, and the newly secured India-US trade deal, the stage is set for significant discussions.

Experts are closely watching the central bank's next move, as the RBI has already slashed the key short-term lending rate by 125 basis points since February of last year. While many predict a pause in rate changes, some believe there might be room for one more reduction to further ease borrowing costs.

Madan Sabnavis, Chief Economist of Bank of Baroda, and other economists suggest a rate hold is likely given tight liquidity conditions and stable government borrowing programs. However, additional measures such as liquidity augmentation and potential CRR adjustments are being considered to ensure continued economic stability.