RBI likely at end of rate-cut cycle, to opt for long pause as inflation risks tilt up: BoB Report

The Reserve Bank of India (RBI) is likely approaching the conclusion of its rate-reduction phase and may maintain an extended pause, as constrained opportunities for further interest rate cuts persist barring unexpected deviations in the forthcoming CPI and GDP data, notes a Bank of Baroda analysis.

Per the report, recent RBI policy signals—including its neutral monetary stance—suggest the Monetary Policy Committee (MPC) now prioritizes stabilizing growth and maintaining financial resilience over additional rate reductions. The analysis emphasized that “the RBI appears to have concluded its rate-cutting measures and is poised for a prolonged pause.”

In the latest policy announcement, the RBI Governor remarked, “Low inflation affords flexibility to bolster economic growth while safeguarding financial stability. We remain dedicated to nurturing this momentum.”

The report interprets this guidance, paired with the neutral stance, as signaling the termination of the easing cycle and a shift toward steady policy rates. The MPC unanimously held rates steady in its February meeting after a 25-basis-point cut in December 2025. The neutral policy stance underscores equilibrium between growth objectives and inflation management.

The repo rate remains at 5.25%. Regarding liquidity, the RBI affirmed its readiness to ensure adequate funding availability as needed. The central bank deferred comprehensive growth and inflation projections until April 2026, pending the release of revised CPI and GDP datasets later this month.

The April 2026 policy review is anticipated to provide clearer direction on annual economic and inflation trajectories. Considering evolving macroeconomic conditions and recalibrated inflation estimates, the report concludes the RBI has exited its rate-cutting phase and entered a sustained pause period.

Published on February 9, 2026