Has the RBI Ended Rate Cuts? BoB Report Signals Repo Rate To Hold At 5.25%, With Focus on Growth And Financial Stability

RBI Likely Ends Rate-Cutting Cycle, Prepares for Extended Pause

The Reserve Bank of India (RBI) has likely come to the end of its rate-cutting cycle and is expected to opt for a long pause, as there appears to be limited room to lower interest rates further unless the new series of CPI and GDP throw up unforeseen surprises, according to a report by Bank of Baroda.

The report highlighted that recent policy signals from the RBI, including its neutral stance, indicate that the Monetary Policy Committee (MPC) is now focused on supporting growth while preserving financial stability, rather than continuing with rate cuts. It stated, “We believe that the RBI has come to an end of its rate-cutting cycle and would now opt for a long pause.”

RBI Governor, in his policy statement, noted that “Benign inflation provides the leeway to remain growth-supportive while preserving financial stability. We remain committed to… sustain the growth momentum.” According to the report, this statement, along with the neutral policy stance, suggests that the MPC has reached the end of the easing cycle and will keep policy rates on hold for an extended period.

Policy Rates Held Steady Amid Neutral Stance

The MPC unanimously decided to keep policy rates unchanged in its latest February meeting, following a 25 basis points cut in the previous meeting held in December 2025. The stance of monetary policy was retained at neutral, reflecting a balanced approach between growth and inflation risks. The repo rate is now unchanged at 5.25 per cent.

On the liquidity front, the RBI reiterated that it would continue to maintain sufficient liquidity in the system as and when required. This approach ensures that the financial system remains stable while providing necessary support to growth-oriented sectors.

Clarity Expected in April 2026 Policy Review

The central bank also deferred providing its full-year growth and inflation forecasts to April 2026, as it is awaiting the release of the new CPI and GDP series later this month. According to the Bank of Baroda report, the April 2026 policy will offer more clarity on the outlook for full-year growth and inflation.

Given the current macroeconomic backdrop and revised inflation projections, the report believes that the RBI has concluded its rate-cutting phase and is now set to remain on pause for a prolonged period. Observers expect the MPC to focus on sustaining economic momentum while carefully monitoring inflationary pressures.

(This article has been syndicated from ANI)