RBI may cut policy repo rate by 25 bps to 5% in February: Report

The Reserve Bank of India (RBI) might reduce the policy repo rate by 25 basis points to 5 percent in its February monetary policy meeting, as per a report by Union Bank of India (UBI). The report suggests a potential 25 bps cut in either February or April 2026, citing the RBI’s dovish stance and mentions of low inflation and subdued price pressures. Adjusting for gold’s inflation contribution, the underlying price pressures seem even more moderate, the report highlights.
The report states, “We see scope for a final 25bps rate cut in February or April 2026. Given the dovish policy guidance, we cannot rule out the possibility of a final 25bps rate cut in Feb’26 meeting to 5 percent repo rate, even though predicting the exact timing of the rate cut is challenging.”
UBI also mentions the uncertainty in timing due to upcoming Consumer Price Index (CPI) and Gross Domestic Product (GDP) base‑year revisions in February 2026. These revisions might lead the Monetary Policy Committee to take a cautious approach and reassess inflation and growth trends post the revised data release.
In December, RBI’s Monetary Policy Committee (MPC) reduced the repo rate by 25 bps to 5.25 percent, with the next MPC meeting scheduled for February 4–6, 2026. The RBI has revised the FY26 growth estimate to 7.3 percent, anticipating sustained growth in the second half due to various domestic factors.
A recent report from Yes Bank suggests that a new consumer price index (CPI) with reduced food weightage could limit the benefit from falling food prices, potentially reducing the room for further rate cuts unless there is a significant weakening in growth. The RBI’s efforts to maintain comfortable liquidity levels and align the operative rate with the repo rate are expected to continue.