RBI could further cut repo rate by 25 basis points to 5% at February policy meeting: UBI report

The Reserve Bank of India (RBI) may cut the repo rate by 25 basis points (bps) at its monetary policy meeting in February, bringing down the benchmark interest rate to 5 percent, a Union Bank of India report showed.

The report highlighted that there is scope for a final rate cut of 25 basis points in February or April 2026, given the central bank’s accommodative policy guidance. It noted that the RBI has referred several times to favorable inflation conditions and subdued underlying price pressures.

The report added that if the impact of gold inflation of around 50 basis points is adjusted, inflationary pressures appear even more subdued. “We see scope for a final rate cut of 25 basis points in February or April 2026. Given the dovish policy guidance, we cannot rule out the possibility of a final rate cut of 25 basis points in February 26, to a repo rate of 5.0 percent, even though the timing of the final rate cut is generally difficult to determine,” the report said.

However, the report also points out that the timing of the final interest rate cut remains uncertain. One important factor is the upcoming revision of the base years of the Consumer Price Index (CPI) and Gross Domestic Product (GDP), which will take place in February 2026. In this context, the Monetary Policy Committee (MPC) may choose to take a wait-and-see approach to reassess inflation and growth trends after the revised data becomes available.

The MPC announced a 25 basis point cut in the policy repo rate at its December policy meeting, bringing it down to 5.25 percent. The decision was communicated by RBI Governor Sanjay Malhotra after the conclusion of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5. The Governor stated that the MPC had made a detailed assessment of the evolving macroeconomic conditions and future prospects before reaching the unanimous decision to implement the rate cut with immediate effect.

Now, the next meeting of the RBI’s Monetary Policy Committee is scheduled for February 4, 5 and 6, 2026. Market participants will be closely watching the meeting for clues on the timing and extent of any further easing, especially in light of evolving inflation dynamics and upcoming data revisions.

Published on December 22, 2025