MPC Poll | RBI likely to hold rates in February policy amid comfort on inflation, higher growth

Reserve Bank of India

• RBI likely to keep interest rates unchanged in February policy review
• Experts divided on inflation and GDP projections amid new base year changes
• CPI and GDP data to shift to updated base years for more accurate measurement

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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is likely to maintain the status quo on interest rates in its February policy review, a Moneycontrol poll of 14 economists, bank treasury heads and fund managers has found.

The rate-setting panel is likely to draw comfort from the higher growth and inflation averaging around the medium term target of 4 percent, the majority of experts said.

“The status quo is driven by expectation that FY27 inflation will average at 4 percent which is target levels. Growth indicators show pickup in domestic demand supported by GST cuts and monetary policy easing by RBI,” said Gaura Sengupta, Economist at IDFC First Bank.

However, few experts believe that the central bank will cut rates by 25 basis points (Bps) in the upcoming monetary policy.

The MPC is to meet from February 4 and February 6 for its bi-monthly policy review.

Since February, 2025, the MPC has reduced the repo rate by 125 bps to aid growth, with a 25 bps cut each in February and April, 50 bps in June, and 25 bps in December. However, the RBI has kept repo rate unchanged in August and October monetary policy.

The central bank will stick to its “neutral” stance and keep its tone dovish in the upcoming policy, experts said. This tone is targeted at lowering interest rates to increase spending and lending, as well as giving a boost to growth.

“Since both inflation and growth is panning out broadly in line with expectations, we do not see any convincing reason to change the monetary policy stance (or action),” said Vivek Kumar, Economist at QuantEco Research.

Inflation projection

Most economists and experts remained on the divided view on the Consumer Price Index (CPI) inflation projections. This is because, few experts said the central bank may remain in wait and watch mode before revising inflation forecast ahead of the new base year series for GDP and CPI.

India’s inflation firmed up in December, rising to a three-month high of 1.33 percent from 0.7 percent in November, government data released on January 12 showed.

Even with the uptick, headline inflation has now stayed below the RBI’s lower tolerance threshold of 2 percent for four consecutive months, underlining how price pressures have cooled meaningfully since the middle of the year.

For the year as a whole, inflation averaged about 2.2 percent in 2025, making it one of the lowest readings seen in over a decade, helped largely by a sharp easing in food prices.

December also marks a transition point for India’s inflation statistics. It is the final consumer price index (CPI) reading under the 2012 base year. Starting with the January print — due on February 12 — the CPI series will shift to a new 2024 base, with an updated consumption basket that includes more items and assigns a higher weight to non-food components.

The change is significant because the current CPI is heavily food-weighted, with food accounting for more than half of the index. This makes headline inflation highly volatile, as sharp swings in vegetables, cereals or pulses can move the overall number even when non-food prices remain stable.

GDP forecast

Similar to inflation, experts also remained divided on revision in growth projections.

Following India’s impressive 8.2 percent GDP growth in the recent fiscal period, the Ministry of Statistics and Programme Implementation (MoSPI) has announced that the third-quarter (Q3) GDP for 2025–26 will be released using the new base year of 2022–23.

Subhash Garg, Secretary at MoSPI, said on November 28, “The first advance estimate in January will follow the existing 2011–12 base, but the second advance estimate on February 27 and Q3 numbers will be calculated on the new base. To ensure continuity, we will also release Q1 and Q2 in the new series.”

The upcoming GDP series marks the first base-year revision since 2011–12.

The revised GDP methodology aims to better capture India’s evolving economic structure, including informal-sector activities and more accurate measurement of gross value added (GVA) across key sectors.

In December monetary policy, the RBI projected real GDP growth for 2025-26 at 7.3 per cent, with Q3 at 7.0 per cent; and Q4 at 6.5 per cent. Real GDP growth for Q1:2026-27 is projected at 6.7 per cent and Q2 at 6.8 per cent.