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RBI Rate Pause to Continue as CPI Revision Shows Limited Policy Impact

A Union Bank of India report states the revision of the CPI base year to 2023-24 has had a limited impact on monetary policy interpretation. It notes headline CPI inflation for January 2026 rose to 2.75% under the new series, while core CPI pleasantly surprised by dropping to 3.46%. The report maintains the RBI's Monetary Policy Committee is likely to hold interest rates steady in the coming quarters. The central bank's focus will remain on inflation momentum trends and managing liquidity conditions.

Key Points: RBI to Hold Rates; CPI Base Revision Has Limited Impact: Report

  • Jan 2026 CPI at 2.75% under new base
  • Core CPI dips to 3.46%, a positive surprise
  • Food weight in CPI basket reduced to ~40%
  • RBI to focus on inflation momentum, liquidity
2 min read

CPI base revision has limited impact, RBI likely to hold rates in coming quarters: UBI Report

UBI report says CPI base revision to 2023-24 has limited policy impact. RBI likely to maintain status quo on rates, focusing on inflation momentum and liquidity.

"We maintain our view of status quo on rates in the coming quarters - Union Bank of India Report"

New Delhi, February 13

The revision in the Consumer Price Index base year has had a limited impact on monetary policy interpretation, and the Reserve Bank of India is expected to maintain the status quo on interest rates in the coming quarters, according to a report by Union Bank of India.

The report stated, "India: Jan'26 headline CPI rises to 2.75 per cent as expected on base revision while core CPI dip to 3.46 per cent provides solace; we maintain MPC view of status quo on rates."

It noted that the base revision has limited impact on near-term policy interpretation, as the MPC may choose to closely watch for trends in the coming trends with a deeper focus on inflation momentum and not just YoY levels.

The report added, "We maintain our view of status quo on rates in the coming quarters (as signalled by RBI Governor in Feb'26 MPC) and liquidity will remain the key policy focus area."

As per the new base year 2023-24, CPI inflation in January 2026 rose to 2.75 per cent, compared with 1.33 per cent in December under the old base year 2011-12.

The Core CPI slipped to 3.46 per cent, a significant positive surprise against the estimate of 4.73 per cent under the old base. This was mainly due to a fall in the weight of gold CPI to 0.62 per cent from 1.1 per cent.

Core inflation excluding gold inched up to 2.91 per cent, showing that "underlying inflation trends remain weak." Meanwhile, food CPI moved back into the inflation zone at 2.11 per cent.

The report said the new base data is more comprehensive, with the weight of food reduced to around 40 per cent from around 46 per cent, and expanded coverage of markets, towns, goods and services.

It added that since sub-group data under the new series is available only from January 2025, inflation momentum trends will be crucial for policy assessment.

Overall, the report maintained that despite the base revision, the Monetary Policy Committee (MPC) is likely to focus on inflation momentum and liquidity, and keep rates unchanged in the coming quarters.

- ANI

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Reader Comments

P
Priya S
While the core CPI dip is positive, I'm a bit worried about food inflation creeping back into the zone at 2.11%. As a homemaker, I feel the pinch of vegetable and pulse prices more than any index revision. Hope the momentum stays under control. 🍅🥔
R
Rohit P
The base year revision was long overdue. 2011-12 is ancient history for our economy! A more comprehensive index with updated weights reflects today's consumption basket much better. Kudos for that, even if the policy impact is limited for now.
S
Sarah B
Interesting analysis. The significant drop in core CPI due to reduced gold weight is a technical point many might miss. It shows how important the composition of the index is. The RBI's wait-and-watch approach seems prudent until clearer trends emerge from the new data series.
K
Karthik V
Status quo on rates is expected, but I respectfully disagree that the base revision has "limited impact." It changes the absolute inflation number we see every month! For public perception and market sentiment, that headline 2.75% vs 1.33% matters, even if policymakers look at momentum.
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Nisha Z
As a small business owner, stable interest rates are a relief. The last thing we need right now is more expensive loans. The report's emphasis on underlying weak inflation trends is concerning though. Hope demand picks up soon!

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