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Informist, Monday, Feb. 2, 2026

 

By Shubham Rana

 

NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is expected to keep interest rates on hold at the conclusion of its three-day meeting Friday, according to an Informist poll. The Monetary Policy Committee had lowered the repo rate by 25 basis points in December to 5.25%, bringing the total policy easing in 2025 to 125 bps, the most in a calendar year since 2019.
 

All but two of the 17 economists and market participants polled by Informist said they expect the Monetary Policy Committee to leave the repo rate unchanged at 5.25% Friday. Most economists are of the view that the RBI's rate-setting panel is at the end of the policy easing cycle and more rate cuts are unlikely in 2026. The committee is also seen continuing with the "neutral" policy stance.

 

With inflation projected to rise in the coming months and growth seen staying stable around 7%, the committee is unlikely to ease rates further, economists said. It would prefer to wait to assess the impact of the new CPI and GDP series on inflation and growth, they said.

 

"From here on, we expect the RBI to remain in a 'wait and watch mode' and its reaction function to hinge on evolving growth-inflation dynamics," Morgan Stanley said in a report. "The benign trend in inflation ensures policy space to ease rates further or inject durable liquidity, contingent upon macroeconomic conditions."

 

RBI Governor Sanjay Malhotra had said in December that the growth-inflation balance, especially the benign inflation outlook on both headline and core, continues to provide the policy space to support the growth momentum. But economists said the Monetary Policy Committee would use this space only in the case of an economic shock or if growth slows sharply.

 

At the December meeting of the committee, the RBI lowered its headline inflation projection for the financial year 2025-26 (Apr-Mar) by 60 bps to 2.0%. The central bank sees inflation rising to 2.9% in the March quarter and then to 3.9-4.0% in the first half of FY27.

 

CPI inflation rose to a three-month high of 1.33% in December with food inflation in the negative zone. The new CPI series, to be released Feb. 12, is seen pushing inflation higher in the near term with the weightage of food and beverages coming down to 36.8% from 45.9% in the old series. Economists said the weight for core inflation--which was at a 28-month high of 4.6% in December--would now be around 55-57%, up sharply from 47% in the old series.

 

The RBI projects GDP to grow 7.3% in FY26 while the government's first advance estimate has pegged the current year's growth at 7.4%. The Economic Survey for FY26, released Thursday, projected India's real GDP growth in FY27 at 6.8-7.2%. The new GDP series will be released at the end of February.

 

The Union Budget, presented Sunday, is also unlikely to materially influence the Monetary Policy Committee's decision, economists said. "We expect the RBI to view the budget as prudent, given the continued commitment to fiscal consolidation and its focus on growth enhancing reforms. The budget is positive for growth and neutral for inflation...," Nomura, a financial services group, said in a report.

 

Apart from the interest rate decision, market participants will focus on the central bank's measures and commentary on liquidity. "We expect bond purchases to continue this quarter and in Apr-Jun. With the FY27 Budget outlining a record high of borrowings, the central bank might prefer to be agile and nimble in its money market related operations and keep borrowing costs in check," DBS Bank said in a report.

 

The following are the expectations of respondents from the Feb. 4-6 meeting of the Monetary Policy Committee:

 

ORGANISATION	FEBRUARY MEET EXPECTATION
ANZ Banking Group	Status quo
BofA Securities India	25 bps cut
Capital Economics	25 bps cut
DBS Bank	Status quo
HDFC Bank	Status quo
ICICI Bank	Status quo
ICICI Securities Primary Dealership	Status quo
IDBI Bank	Status quo
IDFC FIRST Bank	Status quo
Industrial and Commercial Bank of China	Status quo
Karur Vysya Bank	Status quo
Kotak Mahindra Bank	Status quo
Moody's Analytics	Status quo
Morgan Stanley	Status quo
Nomura	Status quo
South Indian Bank	Status quo
YES Bank	Status quo

 

End

 

Edited by Rajeev Pai

 

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