RBI MPC meet: Why did central bank keep repo rate unchanged? Here's what experts say

RBI Governor Sanjay Malhotra

• RBI keeps repo rate unchanged at 5.25 percent, maintains 'Neutral' stance
• RBI optimistic on growth, cautious on inflation and global risks
• FY27 and FY26 inflation forecasts up slightly due to precious metal prices.

Did our AI summary help?

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) kept its repo rate unchanged on February 6 after a cumulative cut of 125 basis points since February 2025. Analysts have suggested why the central bank chose a pause during its first policy meet in 2026.

While announcing the decisions taken during the MPC meeting, RBI Governor Sanjay Malhotra said that the central bank has decided to maintain status quo on the repo rate at 5.25 percent and retain stance at ‘Neutral’.

Why RBI chose to pause rate cuts this time?

According to InCred Money Team, RBI chose to keep repo rate unchanged this time as it is “threading a narrow path”. “Domestic conditions, growth, inflation, liquidity, are clearly comfortable. But external headwinds have intensified. Global trade uncertainty, tariff-related disruptions, volatile capital flows, and rising precious metal prices introduce asymmetry to the outlook. In that context, holding rates steady preserves policy optionality while avoiding premature signalling,” it said.

Bajaj Broking Research meanwhile said that the RBI’s policy underscores confidence in India’s domestic growth momentum while maintaining vigilance on inflation and global uncertainties.

The RBI MPC’s decision to maintain status quo on the repo rate at 5.25 percent, coming immediately after the growth-oriented Union Budget, signals the RBI’s continued focus on sustaining the economic momentum while keeping inflation within its comfort band, said Rajiv Sabharwal, MD and CEO, Tata Capital. “The policy stance allows the transmission of earlier measures to continue, while providing stability and predictability for borrowers and financial institutions amid evolving global and domestic conditions,” he added.

Are more rate cuts coming ahead?

Dipti Deshpande, Principal Economist at Crisil, said that RBI’s rate cut pause reflects a “wait-and-watch approach. According to the analyst, the MPC will likely maintain pause next fiscal as the inflation trajectory ascends and growth remains healthy. "The overhaul of the CPI and GDP series bears watching for changes in growth-inflation assessment. The RBI will keep the powder dry unforeseen shocks,” she said.

Garima 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.

Retail inflation, based on the consumer price index (CPI), stood at around 1.3 percent in December, sharply below the RBI’s medium-term target of 4 percent and well within its tolerance band of 2–6 percent.

RBI MPC increased the inflation estimates for Q1 FY27 to 4 percent from the earlier estimate of 3.9 percent during the first policy review of 2026.

Additionally, the CPI inflation projection of Q2 of the upcoming financial year 2027 was raised to 4.2 percent, from the earlier estimate of 4 percent.

The CPI inflation projection for FY26 was pegged at 2.1 percent from 2 percent earlier. The RBI estimated Q4 FY26 inflation at 3.2 percent, from the earlier projection of 2.9 percent.

"The slight upward revision in the inflation outlook is primarily due to increase in prices of precious metals, which contribute about 60-70 basis points. The underlying inflation continues to be low," RBI Governor Sanjay Malhotra said.

Follow all LIVE updates from MPC meeting here.