RBI Should Hold Off on Policy Moves, Say Analysts Ahead of April MPC Meet
As the Reserve Bank of India’s Monetary Policy Committee (MPC) gears up for its April 2025 meeting, economists and financial experts believe the central bank is best positioned to maintain a ‘do nothing’ stance.
Global Volatility Demands Caution
With global economic uncertainty, including oil price fluctuations, interest rate pressures from the US Fed, and ongoing geopolitical tensions, the RBI is likely to adopt a watchful approach. Many analysts argue that no policy action is preferable at a time when stability in inflation and modest growth signals are visible.
Inflation Within Target Range
Headline inflation has recently cooled, with the Consumer Price Index (CPI) moving closer to the 4% comfort zone, the midpoint of the RBI’s target range of 2-6%. Core inflation has also moderated, offering the MPC room to maintain the repo rate at 6.5%.
Growth Momentum Needs Protection
India’s GDP growth remains on track, and the central bank may not want to risk derailing momentum through abrupt rate changes. By holding the current rates, the RBI could support credit flow to MSMEs and retail borrowers while remaining ready to act if inflation surges again.
Liquidity Management Still Key
Instead of changing the repo or reverse repo rates, the MPC could continue focusing on liquidity management tools like variable rate reverse repo (VRRR) auctions and other calibrated operations. This would help the RBI regulate excess liquidity without disrupting broader economic activity.
What Markets Expect
Bond and equity markets are largely pricing in a status quo, with traders expecting the central bank to maintain its cautious tone. Most analysts suggest that any policy pivot may not occur until late 2025, possibly after clearer signals on US Fed direction and monsoon performance domestically.
Verdict: Let Policy Tools Stay Idle
For now, the best move may be no move. With signs of macroeconomic balance returning, the RBI’s decision to “keep its powder dry” would allow room for sharper interventions in the future, if needed. Stability could be the RBI’s strongest signal this season.
