New Delhi: The Reserve Bank of India (RBI) is set to hold its monetary policy committee (MPC) meeting from February 4-6 and according to economists, the MPC is expected to vote for a pause on a policy rate cut, while the central bank undertakes direct measures to tackle liquidity, bond stability and currency-related risks. 

The Central Bank has already lowered the repo rate by 125 basis points since February 2025 to 5.25 per cent.

“With the government remaining on course its fiscal consolidation path, we don’t expect any material impact on the direction of monetary policy,” said Radhika Rao, Executive Director and Senior Economist at DBS Bank.

The MPC lowered rates in December 2025 but is expected to refrain from cutting rates further in February.

“We expect bond purchases to continue this quarter and in April-June 2026. With the FY27 Budget outlining a record high of borrowings, the central bank might prefer to be agile and nimble its money market related operations and keep borrowing costs in check,” said Radhika Rao, Executive Director and Senior Economist at DBS Bank.

Growth impulse has been firm despite trade tensions, while inflation is off lows. The rupee has continued to be under pressure, depreciating to successive fresh lows. Deposit mobilisation has already been a challenge, said Rao.

Overall, the Union Budget 2026 preserves macroeconomic stability and maintains continuity in policy. Fiscal consolidation will continue, with the centre’s debt-to-GDP ratio projected to decline by around 0.5 per cent and the fiscal deficit expected to narrow to 4.3 per cent of GDP.

The effective revenue and primary deficits stand to consolidate further, said the economist, adding that moreover, lowering rates further could spur further repatriation of rate-sensitive portfolio flows.

The RBO recently announced a series of liquidity-enhancing measures that will pump in more than Rs 2 lakh crore into the banking system to ease liquidity pressure. The Central Bank said it will use a combination of open market bond purchases, a foreign exchange swap, and a variable rate repo operation to ease liquidity conditions in the financial system. The steps are being undertaken following a review of current liquidity and financial conditions.

According to SBI Research, even as the RBI has cut repo rate by 125 basis points and has proactively injected/announced Rs 6.6 lakh crore in the current fiscal as part of open market operations (OMO), yields are refusing to budge down, as such level of liquidity management has resulted in asymmetric transmission across market segments.

“We propose that RBI does OMO in papers that are liquid to make a meaningful impact on yields. For example, the current 10 year paper is 6.48 per cent 2035. The RBI can do OMO in just the preceding 10 year paper, that is 6.33 per cent 2035/immediate outgoing benchmark paper,” said the report.