Home loans will also become cheaper after the Budget, RBI will cut the repo rate by 0.25%; who guessed it?

News Topical, Digital Desk : After the budget, the general public could receive another gift. This gift could be delivered by the Reserve Bank of India ( RBI ) by cutting the repo rate. Finance Minister Nirmala Sitharaman will present the Union Budget 2026 on February 1, the countdown to which has begun today with the start of the budget session in Parliament.

The Reserve Bank of India (RBI) will cut the key repo rate by another 0.25 per cent in its next monetary policy review on February 6, which is expected to be the last reduction in the current easing phase, a foreign brokerage said on Tuesday.

Who predicted the cut in repo rate?

"...we believe the RBI may continue to ease interest rates going forward, given the likelihood of low inflation and moderation in growth," Bank of America economists said in a note.

How much can the RBI repo rate be cut?

The report further stated that it does not see the rupee's weakness as a major problem for the rate-cutting cycle. There is "uncertainty" in the growth outlook, and the RBI could use policy space to lower the repo rate to 5.25 percent, potentially by 0.25 percent.

The brokerage said the move will be accompanied by significant liquidity injection, with a slightly longer-term guarantee on liquidity.

The brokerage said that frequent forex interventions and volatile liquidity movements require "material liquidity support" from the RBI to help in the transmission of the rate cut.

"If the RBI cuts rates, we believe it will be the last cut in the cycle, but if it doesn't, the RBI may continue to provide dovish guidance to keep its options open," it said.

 The report said inflation is likely to remain lower than the RBI's short-term projections, and the central bank may also raise its GDP growth estimates.

The report said that high-frequency data is showing some strength, especially in the industrial and consumer sectors, and the Reserve Bank may take some comfort from this. However, there are several factors that complicate the policy path.

Improving the macro-operating environment

"Compared to the December meeting, the RBI has observed an improvement in the macro-operating environment, but market dynamics have deteriorated, making the environment for the February policy meeting more difficult," it said.

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