RBI MPC Meeting Updates: Policy rate to remain low for a long period of time, says RBI Governor Sanjay Malhotra

Axis Max Life Insurance CIO Sachin Bajaj says the RBI’s policy pause comes in a jittery global setting—geopolitical uncertainty, volatile currency markets, and inflation running below the MPC’s lower tolerance band.

After cutting rates by 125 basis points over the past year, the MPC unanimously kept policy rates unchanged. Bajaj notes inflation is still below the RBI’s 4% target, but the RBI now expects it to rise to 4.0% in Q1 2026 and 4.2% in Q2 2026, with the upward revision largely driven by higher precious metal prices.

He also sees growth support from trade tailwinds—pointing to the recently concluded India–EU trade deal and the possibility of an India–US trade deal. Still, if global uncertainty starts to drag on growth, Bajaj expects room for more monetary support, including a final 25 bps repo cut to 5% in the early part of the next financial year.

M3M India’s Yateesh Wahaal says the RBI MPC’s decision to keep the repo rate unchanged at 5.25% delivers the one thing real estate likes most: predictability. With demand holding up and buyer confidence improving, a steady rate environment supports mortgage affordability and helps developers plan capital deployment with clearer visibility.

He argues the rate pause also syncs well with Union Budget 2026’s infrastructure-led push, which can strengthen urban ecosystems and liveability in both emerging and established markets. The combination of stable interest rates and sustained public capex, Wahaal says, should support long-term housing demand, quicker project execution, and healthier sector fundamentals, creating room for “future-ready” developments that match shifting consumer preferences.

Axis Max Life Insurance CIO Sachin Bajaj frames the RBI’s rate pause as a “status quo” call in a messy macro moment: elevated geopolitical risk, volatile currency markets, and inflation running below the MPC’s lower tolerance band.

After delivering 125 basis points of rate cuts over the past year, the MPC unanimously kept all policy rates unchanged. Bajaj notes inflation is still below the RBI’s 4% target, but the central bank now sees it rising to 4.0% in Q1 2026 and 4.2% in Q2 2026, with the upward revision largely linked to higher precious metal prices.

On growth, he points to trade momentum, citing the recently concluded India–EU trade deal and the possibility of an India–US deal, as supportive for the outlook. Still, he argues the RBI retains room to act if global uncertainty starts to bite: he expects a final 25 bps repo cut to 5% in the early part of the next financial year if growth concerns intensify.

The RBI’s MPC kept rates unchanged and retained a neutral stance, signalling a pause, not an end to easing. CRISIL’s Dipti Deshpande says the committee is bracing for inflation to pick up in the first half of next fiscal, while upcoming CPI/GDP series revisions argue for caution.

Even without announcing new steps, recent OMOs and forex swaps suggest the RBI will stay active on liquidity to keep lending rates comfortable amid outflows, a credit-deposit gap and heavy bond supply. Earlier rate cuts (125 bps this fiscal) and fiscal support have boosted consumption, with bank credit growth near 14%, the highest since Sept 2024.

CRISIL expects inflation (old 2011-12 base series) to rise to ~5% next fiscal from 2.5% this year, while GDP growth eases to ~6.7% from 7.4%. Bond yields will hinge on RBI support as Centre borrowing is projected at Rs 17.2 lakh crore next fiscal (vs Rs 14.6 lakh crore this year), with state borrowings also a key watch.

At the post-MPC press conference, RBI Governor Sanjay Malhotra said the central bank will soon roll out a framework to compensate customers for small-value frauds, noting that while these cases may form a smaller share by value, they dominate by volume.

He said RBI’s assessment shows around 65% of fraud cases involve amounts below Rs 55,000, making consumer protection a priority. The Governor added that the draft framework will be released very shortly.

At the post-MPC press conference, RBI Governor Sanjay Malhotra said the central bank is “comfortable” with the state of gold loans, adding that the RBI has been closely reviewing lender portfolios.

He said the RBI has also examined credit books across gold loans, MSMEs and personal loans, and the assessment shows good asset quality with low slippages.

At the post-policy press conference, RBI Governor said tax holidays for data centres should help attract fresh investment, signalling confidence that policy incentives can pull long-term capital into digital infrastructure.

On the macro backdrop, the Governor said he is confident India can meet its external sector requirements, adding that the country is at the “same sweet point, or maybe better” on inflation compared with the last policy. Growth, he said, also looks stronger than the last time the MPC met.

On government borrowing, the Governor downplayed concerns over supply pressures, saying the increase in gross borrowing is not significant and that the programme should be managed efficiently.

He also pointed to structural reforms and deal flow as supportive for the external balance, noting that the opening up of the insurance sector and large financial-sector deals could aid capital inflows.

At the post-policy press conference, RBI Deputy Governor Rabi Sankar said the central bank is confident it will be able to manage the government’s borrowing programme smoothly.

RBI Governor Sanjay Malhotra, meanwhile, underlined that the RBI’s key focus is system liquidity, not the CD ratio. He said India’s macroeconomic fundamentals remain 'very robust,' and described the near- and medium-term outlook as 'very healthy' and favourable.

At the post-policy press conference, RBI Governor said the government will also raise funds through Treasury Bills this year, which should help authorities manage the yield curve better and handle the borrowing programme more efficiently.

He noted that the government’s borrowing programme is on the lower side, and said the required resources should be raised at reasonable prices. The Governor also urged markets to focus on the net borrowing figure rather than gross borrowings.

At the post-policy press conference, the RBI Governor said the central bank has 'a number of tools' to manage liquidity, including short- and long-term Variable Rate Repos (VRRs) and open market operations (OMOs).

He said the RBI will continue to provide sufficient liquidity with a clear objective: stronger monetary policy transmission. The immediate target, the Governor added, is to keep overnight rates aligned with the repo rate, with the expectation that this anchoring will gradually transmit to other market rates as well.

At the post-policy press conference, the RBI Governor said the central bank’s duty is to ensure sufficient system liquidity to meet the productive needs of the economy and to support smooth monetary policy transmission.

He acknowledged that the RBI saw some hardening in money-market rates in December, but said transmission has been “excellent” overall. The Governor added that the RBI will continue to provide liquidity pre-emptively.

Speaking at the post-policy press conference, the RBI Governor said the central bank’s responsibility is to ensure sufficient liquidity in the system to meet the productive needs of the economy.

He added that the RBI will also remain focused on effective transmission of monetary policy.

Radhika Rao, Executive Director and Senior Economist at DBS Bank, said the RBI’s decision to keep rates unchanged reflects the MPC’s favourable reading of growth and inflation conditions, especially ahead of the planned overhaul of the CPI and GDP series later this month.

She noted that the Governor addressed the recent uptick in bond yields, outlining multiple drivers and signalling that authorities are ready to respond pre-emptively if needed.

Looking beyond February, Rao expects the RBI to stay on an extended pause, supported by a positive cyclical upswing and improved confidence after the successful conclusion of U.S. trade negotiations. She also sees scope for additional open market operations over this quarter and the next—likely announced outside the formal policy cycle.

Madan Sabnavis, Chief Economist at Bank of Baroda, said the RBI’s decision to keep the repo rate unchanged was widely expected, and markets were largely unmoved. He noted that the central bank has not offered next year’s GDP and inflation forecasts, given that the new series is expected later this month.

Sabnavis said the RBI has reiterated its comfort on providing liquidity, but has not announced fresh measures, suggesting any action will be need-based.

He also pointed to a key follow-through from the Union Budget’s MSME push: the RBI has raised the limit for collateral-free loans to Rs 20 lakh, signalling policy continuity between fiscal measures and credit support.

On rates, Sabnavis said the rate cycle appears to have ended for now, with the repo likely to remain at 5.25% for some time. Any future move, he added, is more likely to be upward if inflation surprises on the higher side.

Arima Kapoor, Deputy Head of Research and Economist at Elara Capital, said the RBI’s decision to keep the repo rate unchanged reflects a shift in focus toward effective transmission of the rate cuts already delivered, alongside confidence in the economy’s healthy growth trajectory. She added that the RBI is also waiting for the new GDP and CPI series before taking fresh calls.

Kapoor flagged that inflation is likely to rise from here as food prices normalise and base effects turn less favourable, narrowing the room for further rate cuts. In her view, only a meaningful shock to the growth–inflation balance would reopen the door to another reduction. For now, she expects a prolonged pause from the RBI.

Rajeev Radhakrishnan, CFA, CIO–Fixed Income at SBI Mutual Fund, said the RBI’s policy statement was broadly in line with expectations, noting that the central bank has already done much of the “heavy lifting” in recent months through policy-rate actions and liquidity infusion.

He added that the RBI is likely to stay proactive on liquidity management as flows evolve, which could keep system liquidity in surplus for some time. In that environment, he expects the RBI to push for a tighter alignment of overnight rates with the policy rate.

Axis Securities PMS CIO Naveen Kulkarni said the RBI’s repo-rate hold and neutral stance were in line with expectations. He noted FY26 GDP growth has been nudged up to 7.4%, while FY26 CPI inflation was raised slightly to 2.1%—still a comfortable outlook.

Kulkarni said another 25 bps cut can’t be ruled out, but looks unlikely given the India–US trade deal backdrop, healthy growth, contained inflation and improving credit trends.

On banks, he flagged Q3 as an inflection point for credit growth, with secured retail strong and unsecured showing early revival; corporate credit remains robust, especially at larger lenders. He expects NIMs to stay steady to marginally improve in Q4 as the December 2025 cut transmission plays out and deposit repricing slows. Credit costs and slippages should trend lower, keeping asset quality supportive. He likes Kotak Mahindra Bank and SBI, and among SMID banks prefers Federal Bank, City Union Bank and Ujjivan SFB.

Two real estate voices read the RBI’s status quo decision differently—one sees a funding opportunity, the other sees a missed chance.

Ankur Jalan, CEO of Golden Growth Fund (GGF), a Category II real estate-focused AIF, said that with real estate demand moderating and bank financing still selective, AIFs are increasingly filling the capital gap. He argued that real estate AIFs can provide structured, long-term funding through flexible capital structures and asset-backed investments, while offering investors diversification, steady income potential, and capital appreciation as demand revives. Jalan added that a supportive monetary approach, especially one focused on adequate liquidity and smoother rate transmission, would further improve the case for real estate AIFs.

In contrast, Lalit Parihar, Managing Director of Dholera-based Aaiji Group, said the broader macro backdrop, trade agreements, easing inflation and a favourable growth outlook made the case for another rate cut. He said cheaper credit would have helped businesses expand capacity faster and given developers more relief to respond to anticipated demand across segments. Parihar added that further easing could have improved affordability for homebuyers, helping sustain housing momentum even as property prices rise.

Real estate leaders welcomed the RBI’s decision to keep the repo rate unchanged at 5.25%, saying it brings stability to a sector heavily linked to borrowing costs.

Pradeep Aggarwal, Founder and Chairman of Signature Global, said the rate pause supports interest-rate–sensitive segments like housing, with earlier cuts still improving affordability and keeping residential demand resilient. He also flagged the Union Budget’s higher public capex of Rs 12.2 lakh crore in FY27 as a further boost via infrastructure-led growth.

Anshuman Magazine, Chairman & CEO (India, SE Asia, Middle East & Africa) at CBRE, called the move “stable and predictable” for developers and investors. He added that low inflation, progress on the India–US trade agreement, and the government’s capex push, alongside fiscal discipline, strengthen the medium-term outlook for the sector.

• RBI undertook several measures in December and January to provide durable liquidity
• Liquidity buffer to be maintained to limit impact of government cash balances
• Liquidity management to allow flexibility amid FX market interventions
• Bank credit recorded an uptick in recent months
• Large industries saw higher credit growth

• FY26 CPI inflation estimate raised to 2.1% from 2.0%
• Q4 FY26 CPI inflation projection raised to 3.2% (from 2.9%)
• Q1 FY27 CPI inflation raised to 4.0% (from 3.9%)
• Q2 FY27 CPI inflation raised to 4.2% (from 4.0%)
• Core inflation (excluding precious metals) expected to remain range-bound
• RBI to present full FY27 CPI projections in April MPC

• RBI Governor said Indian economy remains in a “good spot” despite global uncertainties
• Underlying data shows strong growth momentum, likely to be sustained
• FY26 real GDP growth projection raised to 7.4% from 7.2%
• Real GDP growth for Q1 FY27 revised up to 6.9% (from 6.7%)
• Q2 FY27 growth revised up to 7.0% (from 6.8%)
• Real GVA growth estimated at 7.3%, led by strong services sector performance
• Recovery in urban consumption expected to further strengthen growth
• Improving corporate performance and sustained momentum seen boosting manufacturing activity
• Early results from IT firms indicate improving business activity
• Risks to growth forecasts are evenly balanced

• Repo rate unchanged at 5.25%; RBI maintains ‘neutral’ monetary policy stance
• MSF rate held at 5.50%, SDF rate unchanged at 5.00%
• MPC said the current policy rate is appropriate given prevailing macroeconomic conditions
• Going ahead, MPC will be guided by evolving macro conditions and outlook

RBI Governor Sanjay Malhotra announced a set of regulatory moves aimed at easing compliance for low-risk entities, while tightening oversight where scale could amplify risk.

For NBFCs that do not access public funds and have no customer interface, the RBI is proposing to exempt them from the requirement of registration—a move that could reduce regulatory burden for entities with limited systemic or consumer impact.

At the same time, the RBI signalled closer scrutiny of rapid physical expansion. Malhotra said certain NBFCs will need prior approval to open more than 1,000 branches, indicating a higher supervisory bar for large footprint growth.

On foreign portfolio flows, the Governor said the RBI proposes to remove the Rs 2.5 lakh crore limit under the Voluntary Retention Route (VRR), effectively lifting the cap on investments through this route.

He also said the revised draft regulations on external commercial borrowings (ECB), which were issued earlier, have now been finalised.

RBI Governor Sanjay Malhotra said the central bank will issue broad guidelines for Kisan Credit Cards (KCC), signalling an effort to streamline and strengthen the framework that supports farm credit delivery.

He also announced that the RBI will launch a unified portal for the Lead Bank Scheme, aimed at improving coordination, monitoring and on-ground execution of banking outreach and credit programmes across districts.

In a separate announcement focused on small businesses, Malhotra said a collateral-related threshold of Rs 10 lakh for MSMEs is being proposed, a move that could ease access to credit for smaller enterprises by reducing friction around security requirements.

On the health of the financial system, the Governor said system-level parameters for banks and NBFCs remain sound, indicating that balance-sheet stress is not a dominant concern at this point.

The RBI also signalled a sharper consumer-protection push in payments. Malhotra said the central bank is introducing a framework to compensate customers up to Rs 25,000 for losses incurred in fraudulent transactions. In parallel, the RBI will publish a discussion paper to enhance payment safety, with possible measures including transaction limits and additional authentication for certain categories of users, such as senior citizens.

RBI Governor Sanjay Malhotra said the transmission of past rate cuts into bank lending rates has been substantial. He noted that against a cumulative 125 basis points (bps) cut, the weighted average lending rate (WALR) of scheduled commercial banks has fallen by 105 bps.

Malhotra added that the interest rate effect now stands at 94 bps. On liquidity, the Governor said system liquidity is now around Rs 2 lakh crore, following the RBI’s measures announced in February to improve conditions.

He also flagged that rates tightened in January 2026 in the commercial paper (CP) and certificate of deposit (CD) markets.

RBI Governor Sanjay Malhotra said India’s merchandise exports rose 1.9% year-on-year, aided by trade diversification efforts—an important cushion at a time when global demand remains patchy.

On capital flows, Malhotra said India continues to remain an attractive FDI destination for greenfield projects, signalling steady investor interest in long-horizon bets even amid global uncertainty.

He added that India’s foreign exchange reserves stood at $723.8 billion as on January 30, a buffer he said covers around 11 months of requirements. The Governor also flagged net outflows, which he said grew 5.8%.

On domestic financial conditions, Malhotra said system liquidity has remained in surplus, averaging about Rs 70,000 crore since the last MPC meeting.

RBI Governor Sanjay Malhotra said core inflation, excluding the volatility of precious metals, is expected to remain range-bound, signalling that underlying price pressures are not seen accelerating sharply from here.

On the headline inflation path, Malhotra said the RBI is projecting CPI inflation at 2.1% for FY26, with Q4 FY26 seen at 3.2%. Looking ahead, the Governor said inflation is expected to normalise higher in the first half of FY27, with Q1 FY27 projected at 4.0% and Q2 FY27 at 4.2%.

The RBI, he added, will present its full FY27 CPI inflation projection at the April MPC meeting, alongside the broader set of updated forecasts.

The RBI has deferred its full-year GDP projection for FY27 to the April monetary policy, with Governor Sanjay Malhotra saying the central bank will issue the estimates after the new GDP series is released.

Alongside that, the RBI revised up its near-term growth projections, lifting real GDP growth for Q1 to 6.9% and for Q2 to 7.0%.

On inflation, Malhotra said core inflation, excluding the volatility in precious metals, is expected to remain range-bound.

RBI Governor Sanjay Malhotra said India will get a new series for GDP and inflation “in a few days,” signalling an upcoming refresh in how the key macro indicators are measured and reported.

On the outlook, Malhotra said the Indian economy remains on a steady, improving trajectory, with real GDP poised to clock a significantly higher growth of 7.4%.

He added that real gross value added (GVA) growth is expected to be driven by a strong services sector, with real GVA estimated to expand 7.3%. The Governor also pointed to a revival in manufacturing activity alongside services strength, while noting that construction sector growth remains positive.

RBI Governor said the central bank has kept the Marginal Standing Facility (MSF) rate unchanged at 5.50% and the Standing Deposit Facility (SDF) rate steady at 5.00%.

He also revised the CPI inflation outlook for FY27, projecting inflation at 4.0% in Q1 and 4.2% in Q2.

On growth, the Governor said real GDP is poised to register a higher expansion of 7.4% compared with the previous year.

The RBI on Friday kept the repo rate unchanged at 5.25% and maintained its monetary policy stance at ‘neutral’.

RBI Governor began his monetary policy speech on Friday, saying India’s economy is “in a good spot” even as global uncertainties remain elevated.

He said underlying data points to strong growth momentum, suggesting domestic demand and activity indicators continue to hold up.

The Governor added that the current growth momentum is likely to be sustained in the coming period, signalling confidence in the near-term economic outlook despite external headwinds.

Low inflation alone doesn’t automatically mean rate cuts.

The RBI also looks at:

• Growth momentum
• Global risks and capital flows
• Bond yields and borrowing costs
• How well past rate cuts are reaching borrowers

In this cycle, inflation is low, but bond yields are high and liquidity has tightened. Cutting rates without fixing those issues may not help the economy much.

Benchmark indices Sensex and Nifty opened lower on Friday as investors stayed cautious ahead of the RBI’s monetary policy decision, with the street largely pricing in a rate pause but watching closely for guidance on growth and liquidity.

At around 9:45 am, the Sensex was down 274.28 points, or 0.33 percent, at 83,039.65. The Nifty fell 99.95 points, or 0.39 percent, to 25,542.85.

Traders said the focus is less on the headline rate and more on what Governor Sanjay Malhotra signals about liquidity management and policy transmission in the weeks ahead.

The stance is the RBI’s directional signal about the future.

Accommodative means rates could go down.

Neutral means the RBI is open to either cuts or hikes.

Withdrawal of accommodation means tightening.

Borrowers: EMIs, loan eligibility, credit demand

Savers: FD rates, real returns vs inflation

Businesses: Working capital costs, capex appetite

Markets: Valuations, sector rotations, risk appetite

Global uncertainty remains high, with volatile capital flows, currency movements and shifting risk sentiment. Even supportive developments like the India–US and India–EU trade deals don’t fully offset these risks.

The RBI is likely to reflect this caution in its language, preferring stability over surprise moves in such an environment.

Many economists and fund managers believe the RBI has reached the end of its easing cycle, at least for now. With no pressing inflation or growth shock, the case for further immediate cuts appears weak.

That said, most expect the RBI to retain a neutral, mildly dovish tone, keeping the option of future action open if conditions change.

Governor Sanjay Malhotra will announce the MPC’s decision at 10 am today. The address will be streamed live on the RBI’s official website, YouTube channel and X account.

The policy statement will be followed by a press conference around noon, where Malhotra and other MPC members will answer questions on rates, liquidity, inflation and growth. For markets, the press conference often matters as much as the decision itself.

In recent months, liquidity in the banking system has tightened despite earlier rate cuts. Government cash balances, foreign exchange interventions and heavy bond supply have pushed market rates higher.

As a result, the RBI is expected to focus more on liquidity management, using tools like open market operations (OMOs), to ensure that money flows smoothly through the system and past rate cuts actually reach borrowers.

Since February 2025, the RBI has already cut the repo rate by 125 basis points to support growth. With inflation now well below the 4 percent target and growth showing resilience, many economists believe the RBI can afford to pause.

A pause does not mean the RBI is done. It simply reflects comfort with current conditions and a desire to assess how past cuts are working their way through the economy.

Interest rates influence capital flows. Higher rates attract foreign money; lower rates risk outflows. RBI doesn’t target the rupee, but policy signals often move it. That matters for import inflation, oil prices, and companies with dollar debt or export exposure.

Government bond yields react instantly to RBI commentary on inflation, borrowing, and liquidity. A dovish tone lowers yields, reducing government borrowing costs. A hawkish tilt pushes yields up, raising fiscal pressure. This quiet bond-RBI dance shapes everything from bank margins to infrastructure financing.

Even after rate cuts, banks take time to pass on benefits. Transmission depends on deposit rates, liquidity, and competition, not just RBI action. That’s why borrowers often see delayed EMI relief, and why RBI keeps pushing banks to improve transmission through external benchmark-linked loans.

Retail inflation (CPI) drives RBI policy, not wholesale inflation (WPI). Food prices, housing, fuel, and services dominate CPI, making monsoons, oil prices, and global supply chains critical inputs into RBI’s thinking. A fall in WPI doesn’t automatically mean rate relief if CPI remains sticky.

Traders say expectations of a status quo outcome from the RBI’s policy decision are well priced in. As a result, the policy announcement itself may not be a major trigger for the rupee unless there is a surprise. The RBI is widely expected to keep the policy rate unchanged at 5.25 percent.

The Indian rupee is expected to open largely unchanged on Friday as traders stay cautious ahead of the RBI’s monetary policy announcement. Risk aversion in global markets is limiting appetite for the rupee and other emerging-market currencies. The policy outcome is already priced in, keeping movements muted in early trade.

RBI’s legal mandate is clear: 4 percent CPI inflation, with a tolerance band of ±2 percent. Growth matters, but inflation breaches force RBI’s hand. If inflation stays above 6% for three consecutive quarters, RBI must formally explain itself to the government. That constraint shapes every policy decision, even when growth slows.

Beyond rates, RBI watches system liquidity like a hawk. Through variable rate repo auctions (VRR), standing deposit facilities (SDF) and open market operations (OMOs), it fine-tunes money supply daily. A “surplus” liquidity regime keeps short-term rates low; a “deficit” regime squeezes funding costs even if repo stays unchanged.

The Cash Reserve Ratio (CRR) mandates how much cash banks must keep with RBI, while the Statutory Liquidity Ratio (SLR) dictates how much must be held in government securities. Changes here don’t happen often, and when they do, markets take notice. CRR hikes drain liquidity instantly; cuts release lending power fast.

While the repo rate gets headlines, the reverse repo rate matters just as much. It’s the rate at which banks park surplus funds with the RBI. A wide gap between the two signals excess liquidity; a narrow gap tightens it. When RBI tweaks this corridor, it’s often nudging banks on how much to lend versus hoard — without touching the headline repo rate.

Beyond rate changes, RBI communicates a policy stance, usually described as accommodative, neutral or tightening. A neutral stance, for example, suggests RBI is neither easing further nor actively tightening, but is data-driven and cautious.

The repo rate is the interest rate at which RBI lends to commercial banks. A lower repo rate generally means cheaper loans for consumers and businesses; a higher one makes borrowing more expensive. Holding the rate steady signals RBI’s caution, aiming to manage inflation without derailing growth or credit flows.

According to Nuvama Research, the RBI is likely to stay on hold after cumulative easing of 125 basis points. Transmission is still in progress and bond yields remain sticky. Liquidity management, not rate action, is expected to dominate.

An SBI research report expects the RBI to maintain a status quo in this policy. It cites global uncertainty and recent bond yield movements as key reasons. The report also highlights the importance of OMO design.

Bond investors will focus on liquidity measures and guidance on yields. Even without a rate cut, supportive liquidity could help cap yields. The RBI’s comfort level with current bond market conditions will be telling.

For borrowers, a pause means EMIs are unlikely to fall further in the near term. However, past rate cuts are still working their way through the system. Credit conditions remain broadly supportive.

With inflation low and growth steady, the central bank has little incentive to shock markets. Stability and predictability are likely to be the guiding principles. Any action is expected to be well-telegraphed.

Foreign portfolio investor outflows have added pressure on financial conditions. Economists warn that aggressive rate cuts could worsen outflows. This strengthens the argument for policy caution.

System liquidity has tightened in recent months due to government cash balances and forex intervention. This has pushed short-term rates higher. Addressing this imbalance is seen as a key RBI priority.

Industry participants in real estate expect the RBI to maintain a supportive stance. Stable rates and ample liquidity are seen as positives for housing demand. A pause, rather than a cut, is unlikely to derail sentiment.

Fund managers are less concerned about the headline rate decision and more about liquidity signals. Clarity on OMOs and money market alignment with the repo rate will matter. Even subtle shifts in tone could influence yield curves.

Governor Malhotra’s forward guidance will be closely tracked. Markets expect an emphasis on data dependence and flexibility. Any hint on future recalibration could move bonds and equities.

Most analysts expect the MPC to stick with a neutral policy stance. This keeps options open without committing to further easing. A mildly dovish bias, however, could still feature in the language.

Economists point out that the transmission of earlier rate cuts to lending rates is still incomplete. Banks are gradually lowering deposit and loan rates. The RBI may prefer to let this process play out before considering further action.

One puzzle for policymakers has been the persistence of high government bond yields. Even after rate cuts, yields have hardened due to heavy borrowing and global pressures. This has strengthened the case for targeted liquidity intervention.

Despite domestic comfort, global risks remain elevated. Volatile capital flows, currency movements and geopolitical uncertainty continue to cloud the outlook. The RBI is expected to reflect these risks in its tone, even if rates stay unchanged.

Since the last MPC meeting, India has sealed trade deals with the US and the EU. Tariffs on Indian goods have dropped sharply, improving export competitiveness. Economists say this adds to growth certainty and reduces the need for immediate policy stimulus.

In its December policy, the RBI projected real GDP growth of 7.3 percent for 2025–26. Quarterly growth was seen moderating gradually through the year. Those estimates are expected to remain intact for now.

On the growth front too, the MPC is expected to stay cautious. GDP numbers are shifting to a new 2022–23 base year, with revisions underway. The RBI is unlikely to rush into altering growth forecasts amid methodological changes.

Given the base-year transition, most experts do not expect the RBI to tweak its inflation outlook in this policy. The central bank is likely to adopt a wait-and-watch approach. Any changes may come only after a few months of data under the new series.

Starting with January data, India’s CPI series will shift to a new 2024 base year. Economists warn this could introduce an upward bias of 20–40 basis points due to higher weight for core items. The RBI is expected to wait for clarity before revising projections.

Retail inflation stood at just 1.33 percent in December, well below the RBI’s 4 percent target. Inflation has stayed under 4 percent for nearly a year, helped largely by food price deflation. This gives the MPC significant policy comfort.

While not a base case, a few economists believe a CRR cut cannot be ruled out if liquidity tightness persists. Such a move would signal a strong intent to ease financial conditions without touching policy rates. For now, expectations remain cautious.

Several estimates suggest the RBI may resort to fresh open market operations to support durable liquidity. Economists peg potential OMO purchases at around Rs 1 lakh crore over February–March. The choice of securities, analysts say, will matter as much as the quantum.

Market participants expect the RBI to focus more on liquidity than on interest rates. Despite past easing, bond yields have remained sticky and money market conditions have tightened. The effectiveness of liquidity tools will be closely watched.

A growing number of economists believe the RBI’s rate-cutting cycle is effectively over. While the central bank may retain a dovish tone, actual rate action now looks unlikely. Any future move, experts say, will be driven by data rather than intent.

With rates likely on pause, experts are advising investors to prioritise capital safety and stable returns. Several market participants see the current phase as an opportunity to lock in fixed deposit rates before any future recalibration, while keeping a close watch on the RBI’s liquidity stance and forward guidance.

With GDP data transitioning to a new 2022–23 base year, experts expect the RBI to avoid immediate changes to growth forecasts. In its December policy, the central bank projected real GDP growth of 7.3 percent for 2025–26. Fresh clarity is expected only after revised GDP numbers are released later this month.

Headline CPI stood at 1.33 percent in December and has remained below 2 percent for several months, driven by food deflation. However, economists caution that the new 2024 CPI base year, starting with January data due on February 12, could introduce an upward bias. The MPC is expected to hold off on revising inflation projections until the new series stabilises.

Market participants believe the policy spotlight has shifted from rate cuts to liquidity conditions and financial transmission. Persistent hardening in government bond yields, elevated borrowing and foreign portfolio outflows have tightened financial conditions despite past easing. Tools such as open market operations, and possibly a CRR tweak, are expected to dominate the RBI’s playbook.

Most economists expect the MPC to maintain a status quo on rates, with the repo rate seen steady at 5.25 percent. Since February 2025, the RBI has already delivered a cumulative easing of 125 basis points to support growth. With inflation well below target and growth broadly on track, experts say the bar for further cuts is now much higher.

RBI Governor Sanjay Malhotra chairs the six-member MPC. The panel includes Nagesh Kumar of the Institute for Studies in Industrial Development, economist Saugata Bhattacharya, Ram Singh of the Delhi School of Economics, RBI Deputy Governor Poonam Gupta, and RBI Executive Director Indranil Bhattacharyya. The committee meets from February 4 to 6 for its bi-monthly review.

The Reserve Bank of India’s Monetary Policy Committee will announce its February policy decision at 10 am on Friday. Governor Sanjay Malhotra’s address will be streamed live on the RBI’s website, YouTube channel and X account, with live updates available on Moneycontrol. A press conference is scheduled around noon, where guidance on liquidity, inflation and growth is expected to take centre stage.