RBI Maintains Steady Course Amid Inflation Concerns

The Reserve Bank of India is expected to keep key policy rates unchanged in its February monetary policy meeting as retail inflation rises. Crisil forecasts a GDP growth moderation to 6.7% next fiscal due to a challenging global trade environment and diminishing domestic fiscal support.

The Reserve Bank of India (RBI) is likely to keep key policy rates steady during its monetary policy review meeting scheduled for February 4-6, 2026. This follows December's reduction of the repo rate by 25 basis points to 5.25%, with a neutral policy stance indicating a data-dependent future approach, according to Crisil.

Crisil points out, "We expect the RBI to stay put on policy rates given the creep up in inflation." Retail inflation in India climbed from 0.71% in November to 1.33% in December, remaining below the RBI's target range of 2-4%. This economic setting was termed by RBI Governor Sanjay Malhotra as a "rare goldilocks period," marked by robust economic growth and low inflation.

Continuing to focus on inflation and economic growth, Crisil anticipates retail inflation to rise to 5.0% for the fiscal year 2026-27, from 2.5% this fiscal. Despite a potential statistical lift from low food inflation, factors like softer commodity prices and the GST rationalisation are expected to contain inflation within the RBI's target band. Meanwhile, crude oil prices are projected to average between USD 62-67 per barrel this fiscal, seeing a modest drop in 2026.