Commerzbank’s Charlie Lay and Moses Lim expect the Reserve Bank of India to keep the policy repo rate at 5.25% as inflation remains contained within the 2–6% target band and growth stays above 7.4%. They see real rates still above neutral and anticipate only a possible rate cut in 2026, contingent on INR stability, with USD/INR consolidating around 89–91 near term.

RBI on hold with modest inflation

"RBI is expected to leave the policy rate unchanged at 5.25% in the near-term as inflation is contained."

"Inflation is at the lower end of RBI's 2-6% target range. It is expected to climb towards 4% in the second half of this year. RBI is projecting just 2.1% for the current fiscal year and will release the new projections soon, based on the new series."

"Inflation is expected to remain modest at around 4% for the next fiscal year."

"On monetary policy, RBI voted unanimously to leave the policy repo rate unchanged at 5.25% in early February. RBI is in a wait-and-see mode given modest inflation, still supportive growth, and the lingering uncertainties on the trade front. We expect them to leave rates on hold for the foreseeable future and to preserve their ammunition for unexpected shocks."

"As such, another rate cut is possible in 2026, but it will be sensitive to INR's stability. RBI may want to avoid further pressure on INR."

"We look for consolidation in USD-INR near term, between the 89-91 range. INR is down 1.2% vs USD year-to-date, and it fell 4.8% vs USD in 2025."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)