Mumbai, Feb 5 : The Reserve Bank of India (RBI) is likely to reduce the repo rate by 25 basis points (bps) in its upcoming monetary policy meeting (MPC) announcement, Goldman Sachs predicted on Wednesday.

The global financial firm believes the cut is necessary due to rising global uncertainties.

According to Santanu Sengupta, the India economist at Goldman Sachs, the future remains uncertain and policymakers will need to carefully manage various economic factors.

He mentioned in a media report that while global economic changes and tariff adjustments could lead to a slight rise in inflation, India is likely to be less affected compared to other countries.

This meeting of the RBI's Monetary Policy Committee (MPC) is important as it is the first one since Sanjay Malhotra took over as RBI Governor.

It is also the second meeting for the three external MPC members -- Ram Singh, Saugata Bhattacharya, and Nagesh Kumar.

Additionally, Rajeshwar Rao has been re-designated in the monetary policy department.

The government has maintained financial flexibility for future measures, while the RBI has made key adjustments in its currency strategy. "In a period of economic slowdown, this move will enable the central bank to shift towards an easing stance," he explained.

According to Sengupta, the recent fall in the rupee's value is a long-overdue adjustment, which should have taken place earlier. "It's a necessary macroeconomic correction," he said.

"Through open market operations, the RBI is expanding its balance sheet, which will increase reserve money growth and help the economy in the latter half of the year," Sengupta noted.

He added that monetary easing will play a crucial role in sustaining India's economic momentum.

Earlier, SBI economists expected the RBI to announce a 0.25 per cent rate cut in the monetary policy committee meeting on February 7.

As the fiscal stimulus of Budget 2025-26 plays out, the RBI at least in the short run has room for rate cuts, according to the SBI Research report.

/IANS