RBI MPC Meeting 2026 Highlights: Repo rate unchanged at 5.25%, says RBI governor Sanjay Malhotra; inflation seen at 2.1% in FY 2025-26

An SBI report noted that the impact of Open Market Operations may depend significantly on the selection of securities eligible under such operations, even if the total amount of liquidity infused into the system remains the same. According to the report, this factor could weaken the transmission of monetary policy measures, leading SBI to state that "RBI is thus likely to maintain status quo in the upcoming policy".

It also pointed out that a key development since the previous policy review has been the conclusion of the EU-India and US-India trade agreements, which resulted in a substantial reduction in tariffs on Indian products from 50 per cent to 18 per cent. The report added that India now stands among Asian economies with relatively low tariff levels, a shift that is expected to enhance export competitiveness and strengthen the country’s trade outlook.

“With GDP growth expected to moderate modestly, but potential growth being supported by sustained public-sector capex and the boost from two major trade agreements, the monetary policy calculus remains finely balanced. A calibrated uptick in retail inflation further limits the case for near-term easing. In this context, the MPC is likely to stay in wait-and-watch mode, keeping the repo rate on hold, as the RBI’s room for additional cuts remains constrained.

Instead, policy focus is expected to shift toward liquidity management and yield-curve stability, particularly in light of the Union government’s ₹17.2 trillion gross borrowing programme. Active management of system liquidity and bond-market spreads will be far more critical than adjustments to the policy rate. Accordingly, no material change in the policy stance or the RBI’s macroeconomic projections is expected at this meeting,” says Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group.

According to a report by State Bank of India, the Reserve Bank of India’s Monetary Policy Committee is expected to keep the repo rate unchanged in its policy decision due on Friday, as ongoing global uncertainties, rising pressure on government bond yields and fluctuations in the domestic currency continue to weigh on the outlook.

The report said that although policy rates were eased earlier, the central bank is likely to pause at this stage given the range of macroeconomic and external risks still present. It also highlighted that government bond yields have remained firm in recent weeks, showing continued upward pressure despite earlier reductions in policy rates.

The Indian rupee is projected to weaken by nearly 2 percent to around the 92 mark against the US dollar by the end of 2026, according to a UBS report, even though the currency has seen short-term support following the announcement of the US-India trade agreement on January 3.

The report noted that the rupee may appreciate temporarily to about 89 per dollar after the trade deal, mainly due to a reassessment of political risk premiums. This shift could also trigger tactical short-covering by investors who had previously taken bearish positions on the currency in the near term.
However, UBS expects limited room for a sustained recovery in the rupee. A key factor highlighted is the Reserve Bank of India's continued focus on strengthening its foreign exchange reserves.

The central bank is likely to use periods of currency strength to build reserves, a move that could also help ease pressures arising from its foreign exchange forward commitments. As of the end of November 2025, the RBI’s FX forward book was estimated at approximately USD 66 billion.