RBI may further cut repo rate by 25 bps to 5% in February policy meet: UBI report

Mumbai: The Reserve Bank of India (RBI) may reduce the repo rate by 25 basis points (bps) in its February monetary policy meeting, taking the benchmark rate down to 5 per cent, according to a report by Union Bank of India.

The report highlighted that there is scope for a final 25 bps rate cut either in February or April 2026, given the central bank's dovish policy guidance.

It noted that the RBI has made multiple references to benign inflation conditions and subdued underlying price pressures.


The report added that if the impact of around 50 bps inflation from gold is adjusted, inflation pressures appear even more moderate.

"We see scope for final 25bps rate cut in Feb or April 2026. Given the dovish policy guidance, we cannot rule out the possibility of a final 25bps rate cut in Feb'26 meeting to 5.0 per cent repo rate, even as the timing of final rate cut is usually difficult to call," the report stated.

However, the report also pointed out that the timing of the final rate cut remains uncertain. One key factor is the upcoming revision of the Consumer Price Index (CPI) and Gross Domestic Product (GDP) base years, which is due in February 2026.

In this context, the Monetary Policy Committee (MPC) may choose to adopt a wait-and-watch approach to reassess inflation and growth trends after the revised data becomes available.

The MPC in the December policy meeting announced a 25 basis points reduction in the policy repo rate, bringing it down to 5.25 per cent.

The decision was communicated by RBI Governor Sanjay Malhotra after the conclusion of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5.

The governor stated that the MPC undertook a detailed assessment of evolving macroeconomic conditions and future outlook before arriving at the unanimous decision to implement the rate cut with immediate effect.

Now the RBI's next Monetary Policy Committee meeting is scheduled on February 4, 5 and 6, 2026. Market participants will closely watch the meeting for cues on the timing and extent of any further easing, particularly in light of evolving inflation dynamics and upcoming data revisions.