MPC Outlook 2026: Economists See No Rate Cut, Repo To Stay At 5.25%

A Reuters poll shows the policy rate likely stays at 5.25% through 2026, with the rupee and liquidity now shaping expectations.

India’s rate cycle has shifted into pause mode. Economists polled by Reuters expect the central bank to keep the repo rate steady at 5.25% through 2026, after cumulative cuts of 125 basis points since February 2025. 

The next policy review is scheduled for February 4–6, and the market is less focused on another cut, more on liquidity comfort and currency stability. The rupee’s recent record lows and heavy bond supply after the Union Budget have kept traders cautious.

Rate Hold Signals: What Is The Core Issue Now?
 

The key issue is not a fresh rate move. It is whether the earlier easing actually reaches borrowers and businesses. In the Reuters poll conducted January 19–28, 2026, over 80% of economists (59 of 70) expected the repo rate to stay at 5.25%after the February 4–6 meeting.  

A minority still expects action: 10 respondents saw a 25 bps cut and predicted a 50 bps cut. With growth still resilient and inflation projections moving higher next year, a long pause is becoming the dominant street call.

What The Numbers Reveal: Liquidity, Rupee, And Borrowing Costs?
 

Reuters flagged a clear trade-off: supporting growth vs keeping the rupee steady. The rupee had hit a record low of 91.9650 per $ on January 23, 2026, amid portfolio outflows.  By February 2, 2026, Reuters reported the rupee had fallen to 91.9875 per $ and was down more than 2% in January.

Liquidity is a linked worry because FX defence can tighten domestic funding. Reuters reported the central bank unveiled steps to inject more than $23 billion into the banking system via bond purchases, FX swaps and repos. 

The same Reuters report detailed a 90-day VRR of 250 billion rupees ($2.7 billion) on January 30, a $10 billion USD/INR swap auction on February 4, and 1 trillion rupees of bond purchases split between February 5 and February 12.

Other news outlets echo this “rate hold, liquidity watch” theme. Moneycontrol reported on February 2, 2026 that the policy focus is likely to be liquidity infusion, not a rate change, and cited economists calling for a wait-and-watch stance.

For borrowers, the consumer narrative is different. LoansJagat noted on January 30, 2026 that many home-loan watchers are tracking whether banks pass through any easing quickly, and why EMIs do not always fall instantly after policy moves.

How The Story Built Up: Earlier Cuts, CPI Revamp, Budget Pressures

The current pause call sits on top of a heavy 2025 easing cycle. Reuters and other reports have consistently referenced the cumulative 125 bps cuts since February 2025, with growth still described as largely government-outlay-led while private investment lags.

Two more developments are shaping expectations going into February. First is the CPI overhaul. Reuters reported on January 29, 2026 that the food weight in CPI will be cut to 36.75% from 45.86%, with 2024 as the base year and 2025as an overlap year. 

The report also said housing and utilities remain 17.66%, and major spending groups expand to 12 from 6. Business Standard and The Indian Express carried the same core numbers and added detail around the rollout timeline and the expected reduction in headline volatility.

Second is the post-Budget bond supply overhang. Reuters reported on February 2, 2026 that planned gross borrowing is 17.20 trillion rupees ($187.63 billion), higher than many traders expected, keeping yields under pressure.

Here is a timeline snapshot of what changed and when.
 

This sequence explains why the February decision is being framed as a liquidity and stance watch, not a dramatic repo call.

What Stakeholders Are Saying?

Economists quoted by Reuters argued the MPC is already “in a very good place” after the prior easing cycle and does not need to push harder.

Another concern flagged in Reuters reporting is that banks being short of funds can slow deposit rate cuts, which then slows lending-rate transmission. Moneycontrol also quoted economists saying liquidity reassurance is the bigger ask this time, with focus on short-term rates and bond-market stability.

Conclusion

A steady 5.25% through 2026 is now the headline expectation, led by the Reuters poll. The sharper story sits in liquidity support and rupee management, which will decide how “easy” the rate hold feels on the ground.