RBI MPC decision: Much along expected line the Reserve Bank of India’s (RBI) six-panel rate-setting committee decided to hold the gunpowder dry as it kept the key repo rate unchanged at 5.25% on Friday.
Announcing the February Monetary Policy Committee (MPC) outcome earlier today, Governor Sanjay Malhotra said the decision to keep the repo rate at 5.25% was unanimous. The monetary policy stance was retained at “neutral”, suggesting rates will stay low for some time to come.
Today’s rate decision comes after the Union Budget and amid a positive economic outlook and reduced external headwinds following trade deals with the US and Europe.
In its previous December policy, the RBI MPC had announced a 25 bps rate cut to 5.25%.
Is RBI’s rate-cutting cycle over?
The growth and inflation remain within RBI’s comfort limit, which, according to analysts signal a possible pause to the rate-easing cycle.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said it may be the end of the rate-cutting cycle if the “growth momentum in the economy sustains” as the RBI Governor said in his speech.
Since the RBI has forecast inflation of 4% and 4.2% for Q1 and Q2, respectively of FY27, there is no room to cut rates further under the present conditions, he added.
RBI marginally raised the FY26 GDP growth forecast to 7.4% from 7.3% earlier, supported by the robust domestic demand and as trade deals with the US and Europe ease external headwinds. Meanwhile, the inflation projection remains around 2% in the current financial year, well below the central bank’s target of 4%.
Balaji Rao Mudili, Research Analyst at Bonanza, said that the pause to the rate cut cycle is expected to be a proactive stance in light of the changes in India’s trade environment.
“The RBI will be in a wait-and-watch mode to see how the India-EU FTA and the potential India-US trade deal affect GDP, inflation and the trade deficit. When the economy receives such a significant non-monetary growth impulse, the reason for any central bank to cut interest rates diminishes,” he said.
In light of the aggressive rate cuts, analysts believe the focus has now shifted to its transmission as well. Since February 2025, the central bank has delivered a cumulative rate cut of 125 bps, marking the most aggressive easing since 2019, according to a Reuters analysis.
Anil Rego, Founder and Fund Manager at Right Horizons PMS, said the focus has clearly shifted from providing incremental stimulus to monitoring transmission, managing liquidity conditions, and safeguarding macro stability.
“While headline inflation has softened, core inflation remains relatively sticky, and external uncertainties from global monetary policy to geopolitical risks and commodity prices argue for caution. In addition, elevated government borrowing and firm bond yields limit the RBI’s room to resume aggressive easing without risking financial market volatility,” Rego cautioned.
Rate cut room available in case growth slows
However, he said that this pause should not be read as a permanently closed door. The RBI has retained flexibility, and any renewed rate action would depend on moderation in growth or a sharper than expected decline in inflation.
“For now, the policy stance suggests a phase of consolidation rather than continued easing, with stability taking precedence over further rate cuts.”
We expect space for further monetary support if growth slows down, said Sachin Bajaj, Executive Vice President & Chief Investment Officer, Axis Max Life Insurance.
A final 25 basis point cut in the repo rate to 5% during the early part of the next financial year could be on the cards to address growth concerns emanating from the uncertain global environment, Bajaj opined.
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