Will the RBI cut interest rates in February 2026?

Most economists surveyed expect the Reserve Bank of India's Monetary Policy Committee to hold the repo rate steady at 5.25% during its February meeting.

What is the main concern for the RBI's Monetary Policy Committee?

The primary concern for the Monetary Policy Committee is expected to be managing systemic liquidity within the banking system, rather than adjusting interest rates.

When will new consumer price index data be released?

The new consumer price index series is scheduled for release on February 12, and the Monetary Policy Committee may await this data before altering its policy stance.

Home / Business and Economy / RBI Rate Hike Pause: Focus Shifts to Liquidity

RBI Rate Hike Pause: Focus Shifts to Liquidity

4 Feb

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Summary

Most economists expect the RBI to hold rates steady at 5.25%.
Systemic liquidity is a key concern, overshadowing interest rates.
Future policy might depend on new CPI data due February 12.

RBI Rate Hike Pause: Focus Shifts to Liquidity

The Reserve Bank of India's Monetary Policy Committee (MPC) is widely anticipated to maintain the repo rate at 5.25% during its February meeting. A significant majority of economists predict a pause, signaling an end to the current rate-cut cycle. The central bank is also expected to retain its 'neutral' monetary policy stance.

This meeting's primary focus is likely to be on managing systemic liquidity, which has remained low. Factors contributing to this include a high government cash surplus and ongoing foreign exchange interventions by the RBI. While inflation is near the 4% target and growth shows resilience, concerns about the rupee and the transmission of past rate cuts have narrowed the scope for further easing.

Economists suggest that liquidity measures, such as open market operations (OMOs) and dollar buy-sell swaps, will be crucial. If liquidity pressures persist, a temporary cut in the cash reserve ratio (CRR) is also a possibility. The MPC may also await further clarity from the new consumer price index (CPI) series, scheduled for release on February 12, before making significant policy alterations.