RBI committee keeps interest rates on hold; economists forecast prolonged pause
Last Updated: Feb 06, 2026, 13:20 IST3 min
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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) unanimously decided to keep interest rates unchanged in its February 6 meeting, expressing that the Indian economy was “in a sweet spot” as economic growth was strong, and inflation was low. “The MPC is of the view that the current policy rate is appropriate,” RBI Governor Sanjay Malhotra said in a statement on the RBI website. “The MPC also agreed to retain the neutral stance. Going forward, the MPC will be guided by the evolving macroeconomic conditions and the outlook based on data from the new series in charting the future course of monetary policy.”
Most economists and analysts Forbes India had spoken to prior to the MPC policy indicated that the RBI would hold rates. This was because much of the action in terms of easing monetary policy and lowering rates had already been taken in 2025.
The RBI had lowered rates by 125 basis points in 2025, bringing them down last by 25 basis points to 5.25 percent in December 2025.
Sakshi Gupta, principal economist, HDFC Bank, says the RBI, as expected, kept the policy rate unchanged, “taking comfort from the recent growth momentum and likely positive spillovers from the trade deals announced”. “This was reflected in the upward revision in its GDP growth forecasts for H1 FY27. We see a 20 to 30 basis points upward revision in our FY27 growth forecast of 6.9 percent on the back of the recent trade deal announcement,” she says.
The US on February 2 lowered the reciprocal tariff on India to 18 percent from 25 percent currently, and waived the additional 25 percent punitive duty for buying Russian oil. India Inc has welcomed the India-US trade deal, calling the agreement a long-awaited reset that lowers costs, sharpens export competitiveness and restores predictability for companies with global ambitions.
Investors have also cheered the deal, with the Sensex index gaining over 2.7 percent or 2,200 points this week to 83,110 points. The rupee has also seen a small pullback against the dollar, gaining 2 percent this week to Rs90.4 against the dollar on February 7.
Malhotra observed that India’s economy continues on a steadily improving trajectory, with real GDP poised to register significantly higher growth of 7.4 percent in 2025-26 compared to the previous year.
The RBI also revised its inflation forecast for H1 FY27 and cautioned against upside risks to inflation. HDFC Bank’s Gupta says: “We see that beyond the rise in precious metal prices, increase in base metal prices and input costs along with any risks due to weather-related disruptions raise the probability of further upside revisions to inflation estimates going forward.”
“Today’s [February 6] communication confirms our view that this is likely to be the end of the rate cut cycle and 5.25 percent could be the terminal rate going into FY27,” Gupta adds.
Garima Kapoor, deputy head of research and economist at Elara Capital, says a shock to growth-inflation balance would only propel another rate cut. “For now, we expect a prolonged pause from the RBI,” she adds.
Kapoor says with inflation expected to rise hereon amid normalisation of food prices and adverse base effect, the scope for further rate cuts has shrunk.
While not much was offered in terms of guidance on liquidity measures from the RBI, Rajani Sinha, chief economist, CareEdge Ratings, says “the governor reiterated the RBI’s commitment to maintaining comfortable liquidity conditions through timely interventions as required”.
“We expect the RBI to continue liquidity-injection measures, particularly in the second half of March when tax-related outflows typically intensify. A comfortable liquidity condition is critical for transmission of the previous rate cuts. On the external front, easing trade policy uncertainties after the recent trade deals are likely to lend some support to the rupee,” adds Sinha.
HDFC Bank’s Gupta explains that as system liquidity conditions improve, on the back of recent RBI measures, they “do not anticipate further announcements on liquidity in Q4 FY26 and anticipate conditions to remain broadly favourable to enable transmission”.
However, on the other hand, supply and demand mismatch, rising global yields and end of the rate cut cycle trade could keep bond yields elevated, Gupta says.
First Published: Feb 06, 2026, 13:29
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