RBI Holds Rates Steady: Focus Shifts to Liquidity and Forward Guidance

The three-day RBI MPC, which began on Wednesday, is likely to signal a nimble, forward-looking response framework amid firm growth and easing external risks post US trade deal, according to Radhika Rao, Executive Director and Senior Economist, DBS Bank.

"Despite inflation moving off lows and rupee pressures persisting, further rate cuts may be avoided given deposit mobilisation challenges and risk of portfolio outflows," Rao said.

The RBI is expected to rely on direct liquidity, bond stability and currency management measures, with bond purchases continuing this quarter and in April-June 2026.

The RBI is likely to maintain status quo in the policy decision, as despite policy rate easing, government bond yields have exhibited persistent hardening in recent periods, among other reasons.

According to economists, the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged.

"We believe that the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged," said an SBI Research report.

"The RBI is thus likely to maintain status quo in the upcoming policy," it added.

Since the last policy, one of the major policy changes is the EU-India and US-India trade deal, resulting in reduction in tariffs on India to 18 per cent from 50 per cent earlier.

Clearly, India has now one of the lowest tariffs among Asian countries which will help in improving our export competitiveness, said SBI Research.

- IANS