Policy decision due Friday as central bank reviews growth and inflation amid easing price pressures at home and fresh trade momentum following India–US deal and India–EU FTA
The first Monetary Policy Committee (MPC) meeting of 2026 of the Reserve Bank of India began on Tuesday, with the policy decision scheduled to be announced on Friday by RBI Governor Sanjay Malhotra.
The three-day deliberations come at a crucial juncture for monetary policy, following a phase of aggressive easing over the past year. Since February 2025, the RBI has cut the benchmark repo rate by a cumulative 125 basis points, signalling a clear pivot towards supporting economic growth while keeping inflation firmly under control.
Members of the MPC are expected to undertake a detailed assessment of inflation trends, domestic growth momentum, and global macroeconomic developments before arriving at a policy decision. The discussions are taking place against the backdrop of continued moderation in inflation, even as policymakers remain alert to food price volatility and external risks.
Headline inflation, measured by the Consumer Price Index (CPI), stood at 1.33 per cent in December 2025 on a provisional basis, compared to December 2024. On a sequential basis, inflation rose by 62 basis points from November 2025, largely due to higher prices of vegetables, meat and fish, eggs, spices, pulses and personal care items.
Despite this month-on-month rise, inflation has remained below the RBI’s medium-term target of 4 per cent for the eleventh consecutive month, providing comfort to policymakers.
This MPC meeting is also the first after the conclusion of the India–US trade agreement and the signing of the India–EU Free Trade Agreement, developments that have improved visibility on India’s external demand outlook. Economists believe the trade deals could support exports, capital inflows and investment sentiment in the coming quarters, factors that are likely to be part of the RBI’s broader growth assessment.
Global monetary signals are also in focus. Internationally, attention has turned to changes in policy leadership and outlook, including news of Trump picking up Kevin Warsh as the new Fed chief who will take over from Jerome Powell, whose term as chair is ending in May. Markets view this development as potentially influential for global interest rate expectations, capital flows, and currency movements.
While the RBI’s policy decisions remain firmly anchored in domestic conditions, global cues ranging from the US interest rate trajectory and dollar movements to crude oil prices are expected to feature prominently in the committee’s risk assessment.
Financial markets, economists, and investors are keenly awaiting Friday’s announcement for guidance on the RBI’s next steps, particularly whether the central bank signals a pause after front-loaded easing or keeps the door open for further policy accommodation, provided inflation remains benign and growth prospects stay resilient.
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