NE BUSINESS BUREAU
MUMBAI, FEB 6
In a calibrated move aimed at preserving macroeconomic stability, the Reserve Bank of India on Friday announced that the Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, while continuing with a neutral monetary policy stance.
RBI Governor Sanjay Malhotra said the decision reflects a careful assessment of evolving global and domestic conditions, noting that while global headwinds have intensified since the December policy, India’s recent trade agreements and resilient domestic fundamentals augur well for the economy.
- MPC votes unanimously to pause rates, prioritising stability amid global headwinds
- CPI inflation outlook benign; Q1–Q2 FY27 projections pegged at 4–4.2%
- Domestic demand, trade deals to anchor India’s growth momentum
Neutral Stance to Balance Inflation and Growth
Reiterating the rationale behind the neutral stance, Malhotra said it allows the central bank to strike a fine balance between containing inflation and supporting growth, without either injecting excess liquidity or tightening financial conditions prematurely.
— ReserveBankOfIndia (@RBI) February 6, 2026
“The RBI continues with a neutral stance as earlier policy easing is still transmitting through the system, even as trade-related implications unfold,” he said.
Inflation Benign, Within Comfort Zone
The Governor underscored that inflation remains under control and below the RBI’s tolerance band, with the outlook staying benign. The central bank has revised its CPI inflation projections for FY27, pegging it at 4 per cent in Q1 and 4.2 per cent in Q2.
He attributed the marginal upward revision to anticipated increases in precious metal prices, while stressing that underlying inflationary pressures remain well contained.
Growth Outlook Favourable
On the growth front, Malhotra said the Indian economy’s outlook remains favourable, driven largely by domestic demand, investment activity and policy continuity.
The MPC had cut the repo rate by 25 basis points to 5.25 per cent in December to spur growth, after having maintained a pause in August and October to rein in inflationary pressures. Prior to that, the RBI had front-loaded a cumulative 100 bps rate cut between February and June, the full transmission of which is still playing out across the economy.
Transmission Key to Growth Impulse
Economists note that lower policy rates and adequate liquidity typically lead to a reduction in lending rates, making borrowing cheaper for consumers and businesses, thereby boosting consumption, investment and overall economic growth. However, the pace and efficiency of transmission by commercial banks will be critical in determining the eventual impact of the rate cuts on the real economy.
