Mumbai, February 6, 2026 - The Reserve Bank of India (RBI) maintained the status quo on interest rates, keeping the repo rate unchanged at 5.25%. The six-member Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, made this decision unanimously at the conclusion of its sixth and final bi-monthly meeting for the fiscal year. The MPC also decided to retain its neutral stance.

This decision comes after a cumulative repo rate cut of 125 basis points in 2025, with reductions occurring in February, April, June, and December. This easing cycle marked one of the most aggressive in recent years. The current hold reflects a period of observation, allowing the central bank to assess the impact of previous rate cuts on the economy.

The unchanged repo rate means the Standing Deposit Facility (SDF) rate remains at 5 per cent, and the Marginal Standing Facility (MSF) rate and the Bank Rate stay at 5.5 per cent.

The MPC's decision is grounded in a detailed assessment of evolving macroeconomic conditions and the overall economic outlook. Several factors influenced the committee's decision. Since the last policy meeting, global economic headwinds have intensified. However, the successful completion of trade deals between India and the U.S., as well as India and the European Union, is expected to positively impact the economic outlook.

The RBI has revised its growth outlook for FY2025-26 upwards to 7.4% from the earlier projection of 7.3%. The MPC anticipates that measures announced in the Union Budget 2026-27 will contribute to growth, with resilient service exports further bolstering the economy.

On the inflation front, the RBI expects inflation to rise in the coming months. Headline consumer price index (CPI) inflation is projected at 4% and 4.2% in the first and second quarters of fiscal 2027, respectively, which is up from prior estimates of 3.9% and 4.0%. CPI inflation is forecast to end the current fiscal year at 2.1%.

The central bank is also preparing to implement a new methodology for calculating CPI inflation, with 2024 set as the base year for comparison. This change will also reduce the weightage of food and beverages in the CPI calculation.

Globally, there is a divergence in monetary policy decisions among major central banks. While the U.S. Federal Reserve and the Bank of England have kept their interest rates unchanged after a series of rate cuts in 2025, the Reserve Bank of Australia recently surprised markets with an interest rate hike. The US Federal Reserve lowered its benchmark rate to 3.50-3.75% late in 2025. The European Central Bank (ECB) has kept its main policy rates unchanged in early 2026 as inflation falls closer to target.

RBI Governor Sanjay Malhotra acknowledged the intensifying external headwinds but highlighted the positive impact of recent trade deals. He stated that the near-term domestic inflation and growth outlook remain positive. The MPC emphasizes a data-driven approach, closely monitoring economic developments to guide future policy adjustments.