After the Union Budget 2026 and the historic India-US trade deal, all eyes are now on the three-day Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting that begins from Wednesday, with the key repo rate decision on Friday.
Economists believe RBI Governor Sanjay Malhotra-led MPC is likely to pause any further policy rate cut. The Central Bank is rather set to undertake direct measures to tackle liquidity, bond stability and currency-related risks.
The RBI has already lowered the repo rate by 125 basis points since February 2025 to 5.25 per cent.
With inflation likely to move higher (even in the new base year series to be published starting February 12, there is little reason for moving in with further cuts, said analysts.
“With the current repo rate at 5.25 per cent, and with inflation anticipated at around 4 per cent (will wait to see if the new series changes the inflation view), the current real rate of 125 bps seems reasonable,” according to a note by Yes Bank.
The RBI should stay on a pause and keep stance at “neutral” and retain its fire power in the event of any growth slump, it added.
“We expect bond purchases to continue this quarter and in April-June 2026. With the FY27 Budget outlining a record high of borrowings, the central bank might prefer to be agile and nimble its money market related operations and keep borrowing costs in check,” according to Radhika Rao, Executive Director and Senior Economist at DBS Bank.
The RBI recently announced a series of liquidity-enhancing measures that will pump in more than Rs 2 lakh crore into the banking system to ease liquidity pressure. The Central Bank said it will use a combination of open market bond purchases, a foreign exchange swap, and a variable rate repo operation to ease liquidity conditions in the financial system. The steps are being undertaken following a review of current liquidity and financial conditions.
