Why might the Reserve Bank of India's MPC remain on an extended policy pause?

The MPC is likely to pause further rate cuts until inflation consistently undershoots its current trajectory and they assess the impact of new GDP and CPI data.

What is the current economic outlook for India according to the RBI?

The RBI Governor described India's current situation as a 'goldilocks period' with high economic growth and exceptionally low inflation.

When will the Reserve Bank of India assess the impact of new economic data?

The MPC is expected to assess the impact of the new GDP and CPI series during its February policy meeting.

Home / Business and Economy / RBI Pause: Inflation Below Target Key for Rate Cuts

RBI Pause: Inflation Below Target Key for Rate Cuts

21 Dec

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Summary

Monetary Policy Committee likely to maintain extended pause on rates.
Further easing depends on inflation consistently undershooting targets.
RBI to assess impact of new GDP and CPI series in February.

RBI Pause: Inflation Below Target Key for Rate Cuts

The Reserve Bank of India's Monetary Policy Committee (MPC) is anticipated to maintain an extended pause on interest rates, with future easing contingent on inflation consistently undershooting current projections. Analysts suggest the MPC will use its February meeting to evaluate the impact of newly released GDP and CPI data series on macroeconomic indicators. This approach aims to balance economic growth support with the preservation of macroeconomic stability.

Recent analysis indicates that inflation has become more benign, and headline inflation is projected to hover around 2.0 per cent for FY27, with the real interest rate near the lower end of the RBI's comfort range. Despite positive GDP growth reaching an eight-quarter high of 8.2 per cent in Q2 FY26, concerns exist about moderating growth momentum in the latter half of FY26, evidenced by high-frequency indicators.