RBI likely to hold rates in February: SBI
What's the story
Ahead of the Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) meeting, the State Bank of India (SBI) has predicted that the central bank is likely to maintain its current stance on repo rates. The prediction comes in light of persistent global economic uncertainty, pressure on government bond yields, and volatility in domestic currency. The RBI MPC announcement is scheduled for Friday, February 6, 2026.
Economic pressures
Macroeconomic challenges persist
The SBI report emphasized that despite previous rate cuts by the MPC, the central bank is likely to keep rates unchanged in its February policy. This is due to macroeconomic and global challenges that continue to persist. The report also noted that government bond yields have been hardening in recent times, even after the RBI eased its policy rates.
Trade impact
Trade agreements may boost India's export competitiveness
The SBI report also highlighted major economic developments since the last RBI MPC in December, including the finalization of the India-EU Free Trade Agreement and a US-India trade deal. These agreements have resulted in a significant reduction of tariffs on Indian goods, with the US cutting its tariff on India to 18%. The report said these moves are likely to boost export competitiveness and improve trade prospects for India.
Stress indicators
Global uncertainty may lead to economic stress
Despite the positive trade developments, the SBI report cautioned about potential economic stress due to global uncertainty. It said that the Geo-Economics Stress Index shows heightened uncertainty can lead to economic stress with a lag of three to four months. This means risks may emerge in the near term, despite recent trade agreements and tariff reductions.