The three-day meeting of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) begins today, with the policy decision scheduled to be announced on Friday by RBI Governor Sanjay Malhotra.
The central bank has already cut the key policy repo rate by a cumulative 125 basis points since February last year, bringing it down to 5.25 per cent. However, analysts now expect the RBI to pause further easing as inflation shows signs of firming up.
“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,” Yes Bank said in a note.
The bank added that the RBI is likely to maintain a ‘neutral’ stance, leaving room to respond to any potential slowdown in growth.
Latest data from the Ministry of Statistics and Programme Implementation showed that year-on-year retail inflation, based on the Consumer Price Index (CPI), stood at 1.33 per cent in December 2025 (provisional). Headline inflation rose by 62 basis points from November, driven primarily by higher prices of personal care products, vegetables, meat and fish, eggs, spices, and pulses.
Despite the uptick, inflation has remained below the RBI’s medium-term target of 4 per cent for the 11th consecutive month, offering policymakers some comfort as they balance growth support with price stability.
At its previous meeting in December, the RBI projected India’s economic growth at 7.3 per cent for the current fiscal year 2025–26, about 50 basis points higher than its earlier estimate. The upward revision reflected stronger domestic demand and improving growth momentum.
Meanwhile, the central bank has announced a series of liquidity-enhancing measures aimed at easing pressures in the banking system. These steps, expected to inject over Rs 2 lakh crore, include open market bond purchases, a foreign exchange swap, and variable rate repo operations, following a review of prevailing liquidity and financial conditions.
Radhika Rao, Executive Director and Senior Economist at DBS Bank, said bond purchases are likely to continue through the current quarter and into April–June 2026. “With the FY27 Budget outlining record-high borrowings, the central bank may prefer to remain agile in its money market operations to keep borrowing costs in check,” she said.
(With inputs from agencies)
