After the recent Union Budget 2026 and the significant India-US trade deal, attention now shifts to the three-day Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting starting Wednesday, with a crucial repo rate decision expected on Friday.
Economists anticipate that the RBI Governor Sanjay Malhotra-led MPC will likely refrain from further policy rate cuts and instead focus on implementing direct measures to address liquidity, bond stability, and currency-related risks.
Having already reduced the repo rate by 125 basis points since February 2025 to 5.25 per cent, analysts suggest that with inflation projected to rise, there may be limited justification for additional rate cuts.
According to Yes Bank, given the current repo rate of 5.25 per cent and an expected inflation rate of around 4 per cent, maintaining the current real rate of 125 bps appears reasonable, pending any changes in the inflation outlook with the new series.
Experts recommend that the RBI maintain a pause, retain a “neutral” stance, and preserve its flexibility to address any potential economic slowdown, especially with the significant borrowing requirements outlined in the FY27 Budget.
DBS Bank’s Executive Director and Senior Economist, Radhika Rao, forecasts continued bond purchases in the upcoming quarter and in April-June 2026, as the central bank aims to manage borrowing costs amidst record-high borrowings projected in the budget.
Recently, the RBI unveiled a set of liquidity-boosting measures amounting to over Rs 2 lakh crore to alleviate liquidity strains in the banking system. These initiatives, including open market bond purchases and a variable rate repo operation, are designed to enhance liquidity conditions following a review of the current financial landscape.
