RBI MPC Policy Update: Inflation Forecast Raised, Rates Hold Steady

The RBI MPC Policy announcement this time came with a familiar message—but with subtle shifts that matter. Inflation remains under control, but the Reserve Bank of India has slightly revised its numbers, keeping an eye on evolving risks. Rates, meanwhile, stay exactly where they are.

Here’s how the story unfolded.

Market Performance: Calm Response to RBI MPC Policy

Markets took the RBI MPC Policy outcome in stride. With no surprise on interest rates and only a mild tweak in inflation projections, the mood remained steady. Investors were watching two things closely—inflation direction and policy stance. Both stayed largely predictable.

The central bank chose stability over shock. And markets seemed comfortable with that.

Main News: RBI Revises Inflation Forecast Upward

Under the latest RBI MPC Policy, the central bank raised its inflation estimate for FY26 slightly.

• FY26 Inflation Forecast: 2.1% (earlier 2.0%)
• Policy stance: Neutral
• Repo rate: Unchanged at 5.25%

The RBI said inflation risks are evenly balanced, signaling no urgency to tighten or loosen policy right now.

Updated Quarterly CPI Projections

The RBI MPC Policy statement highlighted modest upward revisions across quarters:

• Q4 FY26:
  • Revised to 3.2%
  • Earlier estimate: 2.9%
• Q1 FY27:
  • Revised to 4.0%
  • Earlier estimate: 3.9%
• Q2 FY27:
  • Revised to 4.2%
  • Earlier estimate: 4.0%

These are not sharp jumps. But they show inflation is no longer drifting lower.

What’s Driving the Inflation Change?

The RBI explained the reasoning in clear terms.

Headline CPI remained low in November and December, even after a 1 percentage point rise across the two months. Inflation stood at 2.6% in December.

The main reason:

• Reduced deflation in food crops (excluding gold)

Food prices didn’t fall as sharply as before. That alone was enough to nudge inflation higher.

Food, Core Inflation, and Supply Outlook

According to the RBI MPC Policy commentary, the food situation still looks supportive in the near term.

Key factors keeping food inflation in check:

• Strong kharif output
• Adequate food grain buffer stocks
• Healthy rabi sowing
• Comfortable reservoir levels

Core inflation is expected to stay low. However, prices of precious metals could cause intermittent swings. These metal prices are estimated to contribute 60–70 basis points to the recent upward revision.

Risks That RBI Is Watching Closely

The RBI MPC Policy also flagged risks that could push inflation higher:

• Global geopolitical uncertainties
• Volatility in energy prices
• Adverse weather conditions
• Unfavorable base effects from the sharp price drop seen in Q4 of 2024

Because of these factors, year-on-year inflation may edge up in Q4 of the current year, even if underlying demand remains muted.

New CPI Series and What Comes Next

Another important update in the RBI MPC Policy discussion was the upcoming CPI series change.

• New CPI base: 2024 = 100
• Release date: February 12, 2026

The RBI stated that full-year CPI projections for FY27 will be shared in the April 2026 policy after the new data series settles in.

RBI MPC Policy: Interest Rates Stay Unchanged

No movement on rates.

Under the latest RBI MPC Policy decision:

• Repo rate: 5.25%
• Standing Deposit Facility (SDF): 5.00%
• Marginal Standing Facility (MSF): 5.50%
• Bank Rate: 5.50%

The stance remains neutral, continuing the direction set after the 25 bps rate cut in December.

The next MPC meeting is scheduled for April 6–8, 2026, where new CPI data will play a bigger role.

Summary: RBI MPC Policy Signals Stability With Caution

The takeaway from this RBI MPC Policy update is straightforward.

• Inflation forecasts have moved up—but only slightly
• Rates remain unchanged
• Policy stance stays neutral
• Food supply conditions look supportive
• Precious metal prices and global risks remain watch points

This is a policy built around balance, not urgency. The RBI is clearly in wait-and-watch mode—keeping inflation in range while giving the economy room to breathe.

For now, stability leads the script. And that’s exactly what the central bank intended.

Source: Livemint