Experts see RBI's rate pause as balanced move, says focus shifts to liquidity management

Mumbai (Maharashtra) [India], February 6 (ANI): Economists and market experts on Friday said the Reserve Bank of India's (RBI) decision to keep the policy repo rate unchanged at 5.25 per cent and maintain a neutral stance was largely in line with expectations, with many highlighting a likely shift in policy focus towards liquidity management rather than further rate cuts.
Reacting to the Monetary Policy Committee's (MPC) decision, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said the outcome was completely in line with market expectations across both rates and stance.
She said, "The MPC delivered completely in line with expectations across rates and stance. The inflation outlook in 1HFY27 has been revised up marginally. While uncertainty remains on the growth-inflation figures as we await the new series, the uptick in commodity prices and weaker currency may pose upside risks to inflation. We therefore see limited room for additional easing onthe repo rate front, with RBIs focus expected to be on ensuring stability on the liquidity front in the year ahead."
Sarbvir Singh, Joint Group CEO of PB Fintech, said the decision to hold rates reflects a balanced and data-driven approach.
He said, "This measured pause, recognising the value of assessing incoming inflation and growth data before further action. As the focus now shifts toward liquidity management and improved transmission across lending rates, the current policy stance should help sustain momentum without overstimulating price pressures".
He said that with growth impulses supported by domestic policy measures and a generally stable macroeconomic backdrop, the pause allows earlier monetary easing to fully transmit through the system.
Santanu Sengupta, Global Banking and Board Leader and former Managing Director at Wells Fargo, said that by maintaining the status quo on the policy rate, the RBI has signalled a move from aggressive easing to what he described as "watchful stability".
He said, "With a revised GDP growth of 7.4 per cent and inflation projected at a benign 2.1 per cent, for FY 26, though expected to edge up towards target, but still remain benign in FY 27, India is clearly in a sweet spot. The 'Neutral' stance, coupled with a focus on liquidity and new trade deals with the US and EU, suggests the central bank is prioritizing the quality of growth over further rate cuts. The emphasis has decisively shifted from rate action to liquidity and yield management."
Vikram Chhabra, Senior Economist at 360 ONE Asset, said it was prudent for the RBI to base future policy decisions on updated inflation and GDP datasets, as both series are scheduled for revision.
He said there may still be room for at most one additional rate cut if the inflation outlook remains benign, but added that the policy focus is likely to shift towards more effective liquidity management.
Meanwhile, Vinayak Magotra, Product Head and founding team member at Centricity WealthTech, said the MPC's decision was in line with expectations.
He said the RBI reiterated its proactive approach to liquidity management, highlighting steps taken in recent months to maintain ample liquidity. With bond yields hardening, he said the central bank has signalled vigilance in ensuring adequate system liquidity while factoring in forex operations and government cash balances.
Ashwini Shami, President and Chief Portfolio Manager, OmniScience Capital, said, "The continued neutral stance and no change in the policy rate were broadly expected. The upward revision in growth projections for the next two quarters reinforces India's status as one of the fastest-growing major economies. The statement also highlighted high capacity utilisation and healthy balance sheets of corporates as well as the financial sector. Continued thrust on capital expenditure is expected to maintain growth momentum, further supported by a low inflationary environment".
Overall, experts said the MPC reinforced a cautious, data-dependent approach, allowing past policy actions to continue working through the system, with future decisions hinging on inflation and growth trends under the new data series. (ANI)