HDFC Bank predicts that the Reserve Bank of India (RBI) will maintain the repo rate at 6.5% in its upcoming monetary policy committee meeting, scheduled for next week. However, the report added that a rate cut is “very much possible” at the next MPC meeting, set to take place in February.

“We anticipate that the RBI will maintain the current policy rate at its meeting next week, although the likelihood of a rate cut in the February policy has increased post this weaker-than-expected data,” read the report. Additionally, the HDFC report forecasts a likely rebound in rural demand during the latter half of the current fiscal year.

The report grounds its positive outlook in several factors, including a robust agricultural sector, disbursements from government programs, and a boost in government expenditure. According to the report, these factors collectively have the potential to stimulate economic growth.

“A recovery in rural demand – driven by strong agricultural performance and government scheme payouts, along with increased government spending, is expected to drive economic activity in the second half of the (fiscal) year,” noted the report.

Meanwhile, India’s GDP growth rate for the second quarter of the 2024-25 financial year slowed down to 5.4% compared to the same period last year, marking a decline from the 6.7% growth rate in the first quarter.

What Else For Repo Rate?

Notably, on October 9, RBI Governor Shaktikanta Das revealed that the central bank had opted to maintain the key repo rate unchanged at 6.5%. The RBI kept the repo rate steady for the tenth consecutive time, maintaining the 6.5% level.

The repo rate is the interest rate at which the RBI lends money to commercial banks.