RBI likely to opt for a longer policy rate pause: ICICI Bank report

On February 6, the RBI’s monetary policy committee unanimously decided to keep the policy repo rate unchanged at 5.25%, while maintaining a neutral policy stance. | Photo credit: FRANCIS MASCARENHAS

The ICICI Bank Global Markets argued that upward inflation shocks also appear unlikely given the recent core inflation data in the new series. The recent rise in oil prices also works in favor of an interest rate pause.

The minutes of the monetary policy meeting held earlier this month showed that members were more optimistic about growth, as reflected in several high-frequency indicators and the recent trade deals with the US and the EU. Therefore, growth for the first half of 2026-27 has been revised upwards by 20 basis points.

The majority of members continued to believe that the inflation outlook is favorable despite the upward revision of CPI projections. The upward revision was due to higher precious metal prices.

Notably, the new CPI series showed an upward trend in food inflation, while core figures remained below expectations.

A more positive growth outlook implies that the likelihood of further rate cuts is low, but a low-for-long regime is likely to prevail as headline inflation is expected to remain around target.

“The focus of MPC is likely to be on transmission and using different instruments to ensure the same. Since the rate cut in December, bond yields and deposit yields have moved in the opposite direction, with the recent rise in oil prices not helping,” ICICI Bank Global Markets said in their report.

On February 6, the RBI’s monetary policy committee unanimously decided to keep the policy repo rate unchanged at 5.25 percent, while maintaining a neutral policy stance.

Published on February 21, 2026