RBI Likely To Hold Policy Rates In Feb Review Amid Inflation Pickup: Crisil

New Delhi, Jan 22 (KNN) The Reserve Bank of India (RBI) is expected to keep its key policy rates unchanged at the upcoming monetary policy review scheduled for February 4–6, 2026, rating agency Crisil said citing a gradual rise in inflation and a need for caution.

The Monetary Policy Committee (MPC) of the RBI had reduced the repo rate by 25 basis points to 5.25 per cent in its December meeting, while retaining a neutral policy stance, signalling a data-dependent approach going forward.

Inflation Uptick Limits Room for Rate Cuts

“We expect the RBI to stay put on policy rates given the creep up in inflation,” Crisil said in its report. India’s retail inflation rose from 0.71 per cent in November to 1.33 per cent in December, marking a moderate increase, though it remains below the RBI’s comfort band of 2–4 per cent, reported ANI.

In December, RBI Governor Sanjay Malhotra described the current macroeconomic conditions as a ‘rare Goldilocks period’, characterised by strong growth and unusually low inflation.

Growth Outlook to Moderate Next Fiscal

Supported by robust growth in the July–September quarter, the RBI had raised its GDP growth projection for the current financial year to 7.3 per cent. However, Crisil expects growth to slow in the next fiscal year.

"Challenging global trade environment, moderating domestic fiscal support and waning support from statistical factors, namely a low base and this fiscal's low deflator, are expected to drag growth next fiscal. However, nominal growth is expected to be higher due to rising inflation," Crisil said.

India’s GDP growth is projected to moderate to 6.7 per cent in 2026-27, compared with an estimated 7.4 per cent in the current fiscal year. 

The National Statistics Office’s first advance estimates pegged real GDP growth at 7.4 per cent for 2025-26, up from 6.5 per cent in the previous year.

Inflation Seen Rising but Within Target

On inflation, Crisil expects retail inflation to rise to around 5.0 per cent in 2026-27 from an estimated 2.5 per cent in the current fiscal year. The agency said the unusually low food inflation this year is likely to create a statistical lift next year.

However, softer commodity prices and the continued impact of GST rate rationalisation are expected to help keep inflation within the RBI’s target band.

Crude Oil Prices to Remain Benign

Crisil also expects crude oil prices to remain moderate. It forecasts crude prices to average between USD 62–67 per barrel in the current fiscal year and USD 60–65 per barrel in calendar year 2026.

Brent crude averaged USD 62.7 per barrel in December, down 1.4 per cent month-on-month and over 15 per cent year-on-year. At the time of the report, crude oil was trading at around USD 59 per barrel.

(KNN Bureau)