Sanjay Malhotra, as the new RBI governor, is likely to cut rates in the next policy review in February. Experts believe so. He says that the possibility of reduction in the policy rate i.e. repo rate has become concrete. Analysts say outgoing Governor Shaktikanta Das is sticking to his stance on rates as was seen in the December 6 meeting, where the rate setting panel headed by him maintained status quo on rates, PTI reported. A brokerage says higher real policy rates and softer growth may create scope for the RBI to reduce the repo rate by 0.75 per cent from February 2025.
Monetary policy will be more liberal
According to the news, analysts at Japanese brokerage Nomura believe that the monetary policy will be more accommodative under the leadership of the new RBI Governor Sanjay Malhotra, also a career bureaucrat, adding that the rate cut in the February meeting is firm. The brokerage said that it is also necessary to cut rates to promote growth in the next meeting. Nomura analysts believe that in the last few weeks, considerable differences appear to be emerging between the government and the RBI. Analysts said both Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal have criticized the RBI for keeping the policy tight.
The decision to appoint Malhotra was taken very hastily.
Domestic brokerage firm MK said it does not rule out the possibility of a rate cut in February. It noted that the decision to appoint Malhotra was taken very hastily, and shows that the government is comfortable placing a bureaucrat rather than a technocrat at the helm of the RBI. Almost all analysts said little is known about Malhotra’s economic views, and MK cited his discussions with bankers, saying he has been outspoken in policy communications, and in his previous role at the Department of Financial Services. , He used to motivate banks to adopt and focus on technology.
Government’s role in monetary policy decisions may become stronger
Analysts at Swiss brokerage UBS said the arrival of a new governor from the finance ministry may tempt market participants to think it could lead to a stronger role for the government in monetary policy decisions. Malhotra will have to balance growth risks and the recent rise in headline inflation, he said, adding that Das maintained the RBI’s autonomy, helped stabilize relations with the government, ensured financial stability ( especially during the pandemic shock), and focused on financial inclusion and digital innovation.
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