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Informist, Thursday, Feb. 5, 2026

 

MUMBAI - Following are the expectations of economists from the meeting of the Reserve Bank of India's Monetary Policy Committee, which began Wednesday. The committee's decision will be announced on Friday.

 

MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES

Even as global macro and market narratives continue to swing, the February Monetary Policy Committee meeting faces a more supportive external backdrop, aided by the US–India trade resolution, which should help stabilise the current account, foreign portfolio investor flows, and the rupee, in our view.

 

That said, inflation is likely to edge higher as favourable base effects fade, while underlying growth drivers remain mixed despite a resilient headline GDP. The RBI could opt for a pause in the February Monetary Policy Committee meeting.

 

Monetary transmission, however, remains weak despite a fairly deep easing cycle and sustained liquidity infusion, and continues to be the key policy constraint. The bear-flattened sovereign curve, widening corporate bond spreads, and rising money-market and wholesale deposit rates underscore this friction.

 

We expect system liquidity to ease to around INR 2.4 trillion by the end of March from around INR 200 billion by end-December, limiting the need for more RBI infusion. However, we will watch for possible regulatory changes for banks in the February Monetary Policy Committee meeting, to ease bank capital constraints and improve credit availability.

 

ICICI BANK

With India signing two back-to-back trade deals with its two largest trading partners, growth outlook has improved to 6.8-7% in FY27, with external sector now a tailwind rather than a headwind.

 

Domestic growth momentum had picked up post goods and services tax rationalisation in the December quarter and has sustained which is positive for outlook. Slower pace of fiscal consolidation in FY27 is also positive for growth. With change in CPI basket along with rising commodity prices and inevitable increase in food prices, we expect CPI inflation at around 4.2% in FY27.

 

After 25 bps rate cut in December, wholesale deposit rates have risen led by pick-up in credit growth and continued FX outflows. With trade deals signed, FPI outflows should ease going forward. After two consecutive years of deficit, we expect balance of payments surplus in FY27 which should ease pressure on the rupee and thus aid in transmission.

 

This also implies lower pace of liquidity injection by RBI in FY27, hence choice of instrument would matter for yields given large general government borrowing. The focus of the current policy should also be on transmission with RBI ready to provide durable liquidity and act as and when required.

 

We see MPC sounding more confident on growth and rupee. Given that both CPI and GDP series are undergoing base year revisions along with substantial change in methodology, we expect MPC to remain on hold. This stance is expected to continue in the year given growth is picking up and pace of fiscal consolidation has slowed down

 

BOFA SECURITIES INDIA

The India-US trade deal would boost the growth certainty and the current momentum seen in high frequency indicators can continue to sustain. We therefore change our rate cut call of 25 bps to hold for the upcoming February meeting.

 

We, however, maintain the need to provide liquidity support to aid the transmission of rate cuts. We also believe RBI is now done cutting rates but will continue to manage its liquidity provisions carefully to ensure rate transmission remains active.

 

SOUMYA KANTI GHOSH, GROUP CHIEF ECONOMIC ADVISER, STATE BANK OF INDIA

Since the last policy, one of the major policy changes is the European Union-India and US-India trade deal resulting in reduction in tariffs on India to 18% from 50?rlier. Clearly, India has now one of the lowest tariffs among Asian countries which will help in improving our export competitiveness.

 

New CPI weights with unchanged index domestic inflation indicates increase in overall CPI marginally by 20-30 basis points. While, in the months when food inflation is higher, the new CPI will be lower by 20-30 bps.

 

We observe that despite policy rate easing, government bond yields have exhibited persistent hardening in recent periods. We believe that the choice of eligible securities itself may influence the effectiveness of open market operations, even when the aggregate quantum of liquidity injection is unchanged.

 

RBI is thus likely to maintain status quo in the upcoming policy.

 

CAREEDGE RATINGS

The February monetary policy meeting is likely to be shaped by a benign inflation outlook, healthy growth momentum, and persistent external headwinds. The domestic economic environment remains broadly resilient, and since the December policy meeting, India has concluded four trade agreements – the US, the EU, Oman, and New Zealand to help cushion the impact of global uncertainties, as these will support growth over the medium to long term.

 

While these recent trade deals provide some comfort on the external front, the evolving global geopolitical situation continues to warrant close monitoring. In this meeting, we expect the RBI to maintain a status quo on both the policy stance and policy rates. Although inflation projections suggest there is room for another 25-bps rate cut, we believe the Monetary Policy Committee will pause and preserve its policy ammunition.

 

Retaining this policy flexibility remains important even after recent trade agreements, as the global environment remains uncertain and susceptible to geopolitical flare-ups that could materially impact domestic growth and inflation dynamics.

 

DEEPAK AGRAWAL, CHIEF INVESTMENT OFFICER-DEBT, KOTAK MAHINDRA ASSET MANAGEMENT COMPANY

The RBI's upcoming policy, coming soon after the Union Budget, is set against a supportive domestic macro backdrop. With inflation well below the target, growth momentum intact, surplus system liquidity, and fiscal consolidation reaffirmed, conditions favour policy stability.

 

While global uncertainties remain, India's relatively strong growth dynamics, improving external position, and record foreign exchange reserves provide the Monetary Policy Committee with ample comfort to stay on pause.

 

Additionally, tariff reduction by the US, European Union-India Free Trade Agreement deal etc would ease pressure on the INR, giving the RBI enough room to release adequate durable liquidity to keep system surplus on durable basis — something that had been constrained in the recent past. Accordingly, the committee is expected to maintain the repo rate unchanged at 5.25%. However, forward guidance is likely to remain mildly dovish, underscoring a datadependent stance and preserving flexibility for recalibration should the growth–inflation tradeoff evolve.

 

ANZ BANKING GROUP

We anticipate that the Monetary Policy Committee will consider the growth-oriented approach of the central government along with the RBI's projections, which are likely to indicate growth near potential and inflation close to target in 2026-27 (Apr-Mar).

 

As such, we do not expect any additional rate cuts; however, the MPC's commentary will probably remain supportive of growth to demonstrate readiness should any downside challenges arise.

 

MORGAN STANLEY

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. The benign trend in inflation ensures policy space to ease rates further or inject durable liquidity, contingent upon macroeconomic conditions.

 

NOMURA

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, so we do not expect this to materially influence the RBI at its next Monetary Policy Committee meeting on Friday, where we expect repo rate to be left unchanged.

 

DBS BANK

With the government remaining on course its fiscal consolidation path, we don't expect any material impact on the direction of monetary policy. The RBI Monetary Policy Committee lowered rates in December, along our expectations, but is expected to refrain from cutting rates further in February.

 

Growth impulse has been firm despite trade tensions, while inflation is off lows. The rupee has continued to be under pressure, depreciating to successive fresh lows. Deposit mobilisation has already been a challenge.

 

Moreover, lowering rates further could spur further repatriation of rate-sensitive portfolio flows. Against this backdrop, the RBI Monetary Policy Committee is expected to vote for a pause, while the central bank undertakes direct measures to tackle liquidity, bond stability and currency-related risks. 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 its money market-related operations and keep borrowing costs in check.

 

CAPITAL ECONOMICS

With the finance ministry still keeping the overall fiscal deficit in check, there is still a small window for the RBI to reduce interest rates. This strengthens our conviction that the RBI will deliver one final 25 bps cut to the repo rate taking it to 5.00% in its policy announcement on Friday. 

 

SONAL BADHAN, ECONOMIST, BANK OF BARODA

Given that there is no pressing concern around growth or inflation, RBI is expected to hold rates unchanged in its upcoming policy. Neutral stance is also likely to be maintained, as the central bank may want to keep option open for one more rate cut if needed.

 

However, for now it seems we have come to an end of the rate-cutting cycle. Focus will be more on infusing liquidity. In both December and January level of liquidity surplus has come down, despite the RBI conducting open market operations bond purchases of INR 3.5 trillion in the same period.

 

Yields remain elevated as investors react to post=ponement of India's inclusion in Bloomberg's global aggregate index and also evaluate government's gross borrowing program announcement in the Budget. As a result, we expect the central bank may announce open market operations bond purchases worth around INR 1 trillion for Feb-Mar.

 

We do not expect any changes in GDP or inflation forecasts, as the Monetary Policy Committee may choose to evaluate actual numbers based on the new base year before changing its forecasts. However, possibility of inflation going up due to base year revision may be weighed in.

 

End

 

Compiled by Shubham Rana

Filed by Tanima Banerjee

 

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