New Delhi, February 6: The Reserve Bank of India‘s Monetary Policy Committee is set to announce its decision on the key policy rate this Friday. Economists believe that after a potential interest rate cut in December 2025, the RBI is unlikely to make any changes in February. However, all eyes will be on the signals the bank provides regarding future policy directions.
The three-day meeting of the Monetary Policy Committee commenced on Wednesday. According to Radhika Rao, Executive Director and Senior Economist at DBS Bank, the RBI may adopt a flexible policy approach in light of robust economic growth and reduced global risks following Trade Agreements with the United States.
Rao stated, “Despite lower inflation and ongoing pressure on the rupee, challenges in deposit mobilization and risks of portfolio outflows may lead to a decision against further rate cuts.”
It is anticipated that the RBI will focus more on measures related to cash management, stabilizing the bond market, and currency management. Government bond purchases are expected to continue during this quarter and from April to June 2026.
The RBI is likely to rely on direct liquidity, bond stability, and currency management measures, with bond purchases continuing in this quarter and the April-June 2026 period.
Economists note that despite a relaxation in the policy interest rate, there has been a consistent rise in government bond yields recently. This trend may prompt the RBI to maintain the status quo in its monetary policy.
A report from SBI Research indicated, “We believe that the selection of eligible securities can influence the effectiveness of OMO operations, even if the total volume of liquidity injection remains unchanged.” It further stated, “Therefore, the RBI is expected to maintain the status quo in the upcoming policy.”
The most significant change since the last monetary policy has been the trade agreements between India and the European Union, as well as between India and the United States. Following these agreements, tariffs imposed on India have dropped from 50% to 18%.
According to SBI Research, India is now among the countries with the lowest tariffs in Asia. This development is expected to enhance the competitiveness of Indian products in the global market and strengthen exports.