RBI Near End of Rate-Cut Cycle, May Take Long Pause: BoB

New Delhi, February 9:

The Reserve Bank of India (RBI) has likely reached the end of its rate-cutting cycle and may now choose a long pause in interest rates, according to a report by Bank of Baroda (BoB).

The report said the RBI has limited room to cut rates further unless the upcoming new series of CPI and GDP data brings unexpected changes.

RBI Focus Shifts to Growth and Financial Stability

The Bank of Baroda report noted that recent RBI policy signals, including its neutral stance, suggest that the Monetary Policy Committee (MPC) is now focusing more on supporting growth while maintaining financial stability.

“We believe that the RBI has come to an end of its rate cutting cycle and would now opt for a long pause,” the report stated.

RBI Governor Signals Growth Support

In his policy statement, the RBI Governor said that easing inflation gives the central bank space to support growth while keeping financial stability in check.

“Benign inflation provides the leeway to remain growth-supportive while preserving financial stability. We remain committed to sustain the growth momentum,” the Governor said.

The report said this statement and the neutral stance indicate that the MPC has likely ended its easing cycle.

MPC Keeps Repo Rate Unchanged

In the latest February policy meeting, the MPC unanimously decided to keep policy rates unchanged.

This decision followed a 25 basis points cut in the previous meeting held in December 2025.

The RBI kept the repo rate unchanged at 5.25%.

RBI to Maintain Liquidity Support

On the liquidity front, the RBI said it will continue to ensure sufficient liquidity in the financial system whenever needed.

The central bank also delayed its full-year growth and inflation forecasts to April 2026. It is waiting for the new CPI and GDP series expected later this month.

BoB Report Expects More Clarity in April 2026 Policy

According to the Bank of Baroda report, the April 2026 RBI policy announcement will provide better clarity on growth and inflation outlook.

The report concluded that given the current macroeconomic conditions and inflation projections, the RBI is likely to stay on hold for a prolonged period.