All eyes are on the Reserve Bank of India as its Monetary Policy Committee concludes its February meeting with a crucial verdict on key rates. Economists widely predict no change following the December 2025 cut, but the bank’s commentary on future policy could send ripples through markets.
The deliberations began Wednesday amid a backdrop of steady growth and favorable trade winds. DBS Bank’s Radhika Rao emphasizes how US trade deals have mitigated external pressures, allowing RBI room for nuanced policymaking. Yet, deposit growth hurdles and potential capital flight temper enthusiasm for further easing.
‘Rising bond yields despite loose policy settings signal caution,’ Rao observes. The central bank is likely to lean on tools like direct liquidity infusions, bond buys to anchor yields, and forex measures. Projections include sustained OMO purchases in the current quarter and Q1 FY27.
SBI Research underscores the importance of security selection in OMOs to maximize impact. Maintaining the status quo seems prudent given these dynamics. Meanwhile, breakthrough trade pacts with the US and EU have dramatically lowered duties to 18%, catapulting Indian exports into a more competitive global arena.
This positions India as a tariff-friendly hub in Asia, likely fueling export momentum. Investors await not just the repo rate call but insightful guidance that could redefine monetary strategy amid evolving domestic and global cues.