NEW DELHI– The Reserve Bank of India may reduce the policy repo rate by 25 basis points to 5 percent at its February monetary policy meeting, supported by dovish guidance and easing inflationary pressures, according to a new report released Monday.
The report said there is room for one final 25-basis-point rate cut, either in February or April 2026, citing the central bank’s repeated references to benign inflation and subdued underlying price pressures.
It noted that when adjusted for an estimated 50-basis-point inflation contribution from gold, underlying price pressures appear even more moderate.
The report said the possibility of a February rate cut cannot be ruled out, though the exact timing remains difficult to predict.
Uncertainty around the timing is also linked to upcoming revisions to the Consumer Price Index and Gross Domestic Product base years, scheduled for February 2026. These revisions could prompt the Monetary Policy Committee to adopt a wait-and-watch approach and reassess inflation and growth trends once the updated data are released.
The RBI’s Monetary Policy Committee cut the repo rate by 25 basis points in December, bringing it down to 5.25 percent. The next MPC meeting is scheduled for February 4–6, 2026.
The central bank has revised its FY26 economic growth forecast to 7.3 percent, citing domestic support from income tax rationalisation, easing monetary policy, and a broader push for GST-led fiscal reforms, which are expected to support growth in the second half of the year.
Another recent report cautioned that a new consumer price index with lower weightage for food items could limit the comfort from declining food prices and reduce the scope for additional rate cuts unless economic growth weakens significantly.
The RBI is also expected to continue its focus on maintaining comfortable liquidity conditions and anchoring the operative interest rate close to the repo rate, the report added. (Source: IANS)
