Monetary policy is the actions taken by a country’s central bank, like the Reserve Bank of India (RBI), to manage money supply and interest rates to control inflation, stabilize the currency, and promote economic growth.
A key tool in this policy is the repo rate, the rate at which the RBI lends money to commercial banks. Changes in the repo rate influence borrowing costs, which in turn affect consumer spending and business investments, playing a crucial role in the country’s economic stability.
RBI Monetary Policy Schedule
The RBI usually conducts the MPC meeting every two months, leading to six meetings in a financial year. During these meetings, the MPC reviews interest rates, money supply, inflation outlook, and several other macroeconomic metrics.
The RBI’s Monetary Policy Committee (MPC) meeting started on April 7, 2025, and will end with an announcement on April 9, 2025, which is tomorrow, at 10:00 AM. Market participants are eagerly waiting for Governor Malhotra’s views on the country’s economic growth and inflation.
This meeting is especially important due to the current global economic situation, with concerns about a possible recession in the U.S. and the impact of tariffs imposed by the Trump administration.
Will the RBI change its policy stance?
The RBI has maintained a “neutral” stance, but some analysts think it may now be time to adopt an “accommodative” stance.
A “neutral” stance gives the RBI the flexibility to either raise or lower interest rates depending on the economy. An “accommodative” stance, on the other hand, shows that the RBI is willing to cut rates further to stimulate economic activity and ensure that rate cuts are passed on effectively to loans and deposits.
Expected Repo Rate Cut
The Reserve Bank of India (RBI) is set to make important decisions about the country’s monetary policy when its Monetary Policy Committee (MPC) meets this week. Under the leadership of Governor Sanjay Malhotra, Economists and market analysts widely expect to lower the repo rate by 0.25 percent, from 6.25 to 6 percent.
This follows a similar rate cut in February, which was the first since May 2020. The anticipated reduction is seen as necessary to address the economic challenges from global trade barriers and currency fluctuations.
A recent report from the State Bank of India predicts that total rate cuts could reach 1 percent over time, with more adjustments expected in the future. This strategy is aimed at supporting economic growth, which is expected to slow due to external factors like U.S. tariffs affecting Indian exports.
How did the Market React when the Repo Rate was Cut last time?
In February 2025, the RBI’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, decided to lower the repo rate by 0.25 percent. This brought the rate down from 6.5 to 6.25 percent.This was the first rate cut since the pandemic, when the RBI reduced the repo rate to 4 percent in May 2020. The rate had been increasing since 2022, reaching 6.5 percent before this recent decrease.
After the RBI cut the repo rate by 0.25 percent from 6.5 to 6.25 percent, the market had mixed reactions. The Sensex and Nifty saw some early drops of 0.4 percent but later recovered slightly. Sectors like banking and finance struggled, with the Nifty Bank index falling, while auto and real estate sectors did well, gaining 0.6 percent and 1 percent. While the rate cut was meant to boost the economy, investors stayed cautious due to global challenges.
Written by Sridhar J
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