Will RBI Keep Its Policy Rate Unchanged in the Upcoming Decision?
Synopsis
As the Reserve Bank of India prepares for its upcoming policy meeting, the financial landscape indicates potential for maintaining the current rate. With bond yields hardening and global uncertainties looming, what might this mean for India's economic future?
Key Takeaways
RBI likely to keep policy rates unchanged .
Bond yields have been hardening recently .
Global economic uncertainty continues .
India's tariffs reduced to 18% under new trade deals .
Potential for further OMO purchases .
New Delhi, Feb 5 (NationPress) The Reserve Bank of India (RBI) is anticipated to keep its current monetary policy unchanged in the forthcoming decision on Friday. Despite a reduction in policy rates, recent trends indicate that government bond yields have shown a consistent increase, among various other factors.
Economists suggest that the selection of eligible securities could significantly affect the success of Open Market Operations (OMO), even if the total liquidity injection amount remains constant.
“We are of the opinion that the choice of eligible securities could play a crucial role in the efficiency of OMO operations, regardless of the unchanged aggregate liquidity injection,” stated a report from SBI Research.
“Thus, we expect the RBI to maintain its current stance in the upcoming policy decision,” it further noted.
Since the last policy update, a notable change has been the EU-India and US-India trade agreements, which have led to a decrease in tariffs for Indian exports from 50% to 18%.
This positions India among the nations with the lowest tariffs in Asia, which is likely to enhance our export competitiveness, according to SBI Research.
Nevertheless, the global economic landscape remains fraught with uncertainty. The Geo-Economics Stress Index indicates that increased uncertainty could result in economic strain with a delay of 3-4 months. Additionally, metal prices have begun to recover following a significant drop last week, according to the SBI report.
Furthermore, a slack labor market, stagnant real disposable incomes, and diminished inflationary pressures could lead to potential rate cuts by the US Federal Reserve.
In this context, the Indian currency has fluctuated between 89-92 per dollar over the past two months and has depreciated by 5.8% against the USD since April 2, 2025, when the US implemented extensive tariff increases. However, there was a notable appreciation of over Re 1 following the India-US trade deal that reduced tariffs.
To date, OMOs totaling Rs 6.16 lakh crore have been executed, and given the current global uncertainties, “we believe the RBI may need to carry out additional OMO purchases of up to Rs 50,000 crore in the remainder of FY to support sustainable liquidity amidst credit growth,” as indicated in the SBI report.
Point of View
I believe it is crucial to remain vigilant about the RBI's decisions, especially in a climate of rising bond yields and global economic uncertainties. The implications of these decisions extend beyond mere numbers; they affect every citizen's financial well-being and the nation's economic trajectory. Our commitment is to keep you informed and engaged with these pivotal developments.
NationPress
2 Jul 2026
Frequently Asked Questions
What is the current status of RBI's policy rates?
The RBI is expected to maintain the current policy rates due to persistent government bond yield increases.
How might global economic conditions affect RBI's decisions?
Ongoing global uncertainties could prompt the RBI to consider further monetary measures to ensure liquidity and stability.
