RBI likely to pause on rates in February policy as liquidity takes centre stage

Subscribe to enjoy similar stories. The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is likely to keep policy rates unchanged at its meeting on Friday, signalling a prolonged pause after aggressive front-loaded easing over the past year, even as liquidity conditions remain tight and bond yields elevated. A Mint poll of 10 economists shows nine expecting a pause at 5.25%, while one anticipates a 25-basis-points (bps) cut to 5.00%.

One basis point is a hundredth of a percentage point. The MPC is scheduled to announce its policy decision after its 4-6 February meeting. The central bank is also expected to maintain its ‘neutral’ stance, which allows it to move in either direction.

However, liquidity measures may take centre stage this time, as systemic liquidity remains low, with the government cash surplus high and the drain from FX intervention persisting. In 2025, the MPC had cumulatively cut the policy repo rate by 125 bps, including a 25 bps cut in December. “We expect the RBI to remain on pause in February," said Gaura Sengupta, chief economist at IDFC FIRST Bank.

“Inflation in FY27 is expected to average at 4%, which is the monetary policy target. Growth is showing signs of becoming broad-based, with a pickup in rural and urban consumption." The broad consensus is that while inflation remains benign and close to the RBI’s 4% target, improving growth momentum, pressures on the rupee, and weak transmission of past rate cuts have sharply narrowed the space for further easing. “This marks the end of the rate-cut cycle," Sakshi Gupta, principal economist at HDFC Bank, said.