According to a report by Angel One’s Ionic Wealth, the Reserve Bank of India (RBI) may encounter challenges in implementing a rate cut in February.

According to that report, RBI may face challenges in cutting interest rates in February, influenced by a shift in the U.S. Federal Reserve’s stance on rate cuts.

The Federal Reserve has paused rate hikes and adjusted its projections, aligning with expectations of two rate cuts each in 2025 and 2026, down from its earlier guidance of four cuts in 2025.

The report highlights that the Fed’s hawkish pause, a stronger dollar, and higher U.S. bond yields signal caution for emerging markets, adding pressure on their currencies.

While domestic conditions in India support a rate cut, global factors, including an unfavourable international backdrop, complicate the RBI’s decision.

The report notes that equity markets will focus on corporate earnings amid these global challenges, emphasising a cautious approach to monetary easing.

The RBI’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5% during its December meeting, maintaining its neutral monetary stance for the 11th consecutive period.

The report concludes that the Fed’s decision underscores difficulties for emerging markets, like India, in pursuing easy monetary policies amid global uncertainties.

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