New Year (2026) But No Rate Cut By RBI in February 2026?

Despite hopes among borrowers and markets that the Reserve Bank of India (RBI) might cut interest rates at its February 4-6, 2026 Monetary Policy Committee (MPC) meeting, economists now broadly expect no rate cut in February. 

According to a recent survey of economists, 8 out of 10 expect the RBI to hold its key policy rate at 5.25%, a level the central bank reduced to earlier in December 2025 to support growth amid benign inflation. 

The central bank’s cautious stance comes as headline inflation has begun to rise from record lows seen earlier in 2025, even though it is still comfortably below its medium-term 4% target.

This development marks a shift from earlier expectations of continued monetary easing — what markets sometimes call “Santa Claus cuts”, particularly because inflation has bottomed and economic growth remains resilient. 

Borrowers who were hoping for cheaper loans in early 2026 now face continuity of the current policy rate environment, even as the RBI preserves policy flexibility against uncertainties such as global trade tensions and an upcoming revision to how inflation is measured in India.

Why RBI Is Expected to Hold Rates in February 2026?

The key reason the RBI is expected to maintain the policy repo rate at 5.25% in its February 2026 review is the recent uptick in inflation. Indian consumer price inflation, which had fallen to multi-year lows (e.g., below 0.5%), has started increasing again, most recently to 0.71% in November 2025. 

This is driven by persistent food price dynamics and weak core inflation. While still low relative to the RBI’s long-run target, this upward movement suggests inflation bottomed out and removes some justification for further rate cuts.

Economists also point to the broader context: the RBI has already enacted a cumulative 125 basis points of repo rate cuts throughout 2025 in response to benign inflation and stable growth trends. With inflation now expected to remain below the upper tolerance band but showing signs of rising, further rate easing in February might not deliver clear macroeconomic benefits. 

Many analysts think the central bank’s priority is to preserve policy space rather than pursue cuts that could undermine its flexibility in dealing with unexpected inflationary pressures. 

Forecasts: What Experts Are Saying
 

Overall, the dominant market view now suggests a pause, effectively signalling that the RBI sees little immediate need for further monetary stimulus. Some institutions still leave room for future cuts, but most analysts believe February 2026 will be focused on preserving economic stability and policy flexibility rather than delivering another rate reduction.

What This Means for Borrowers & Markets?

A continuation of the policy rate at 5.25% means that borrowers will not immediately benefit from lower borrowing costs in early 2026. Loans tied to the repo rate, such as many variable-rate retail loans, business loans, and credit cards, may not see further rate declines in February. 

For an ordinary household or business planning new borrowing, this suggests borrowing costs are likely to stay broadly stable in the near term.

For financial markets, the expectation of an RBI pause could push fixed-income yields slightly higher. In recent weeks, fixed-income markets have already seen yields rise as traders have priced in the likelihood that monetary easing is ending. 

A continuation of rates also maintains the existing policy-rate spread relative to global peers, which can influence capital flows and the exchange rate.

However, the RBI hasn’t completely ruled out future rate changes. As one SBI report noted, the central bank may keep its options open, a strategy that aligns with preserving flexibility. The RBI often assesses incoming data such as inflation prints, growth numbers, the Union Budget, and external risks before making shifts.

Inflation, Growth and the RBI’s Policy Dilemma

The RBI’s policy decisions are fundamentally shaped by a trade-off between controlling inflation and supporting growth. India’s inflation trajectory in 2025 was unusual: it dipped to very low levels, at times below 1%, prompting several rate cuts so far. Yet inflation’s recent rebound, even if modest, suggests that future easing must be more cautious.

At the same time, India’s economy continues to show resilience. Growth projections for FY 2025-26 remain strong, with some analysts expecting growth close to or above 7%. A stronger economy reduces the urgency to stimulate further by cutting rates but also makes controlling inflation important. 

Analysts note that any decision to cut rates in February would need to balance growth momentum with continued inflation moderation, a nuanced challenge for the RBI’s Monetary Policy Committee (MPC).

Could There Still Be a Rate Cut Later in 2026?

Despite the growing consensus around a February pause, some analysts still see room for cuts later in 2026, particularly if inflation undershoots forecasts and growth slows more than expected. Indeed, a few brokerages and research houses had earlier predicted that the RBI could cut rates again, potentially in February or April, if CPI remained subdued and global risks eased.

Yet such views are now less widely held. The central bank’s near-term focus appears to be on maintaining flexibility rather than committing to further easing. If inflation begins rising toward the RBI’s tolerance band or if global trade pressures intensify (for example, due to tariff issues), the RBI may decide that holding rates steady is safer for overall macroeconomic stability.

Conclusion

The RBI’s expected pause on interest rate cuts at its February 2026 MPC meeting marks an important moment in India’s monetary policy cycle. After a prolonged period of easing — with cumulative cuts in 2025, the central bank appears to be shifting toward a more cautious, steady stance, prioritising flexibility amid rising inflation and resilient growth.

Borrowers and markets hoping for further rate relief in February may be disappointed, but this pause also reflects the RBI’s intent to closely monitor incoming economic data before making additional monetary shifts.

Going forward, the trajectory of inflation, growth data, and external risks will be key determinants of when, and whether, the RBI returns to cutting rates later in 2026.

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