The Reserve Bank of India is expected to maintain a wait-and-see approach into 2026, prioritising liquidity management amid external uncertainties and moderate inflation trends, according to JM Financial analysis.
The Reserve Bank of India is expected to stay in wait-and-see mode well into 2026, with JM Financial arguing that the central bank has little reason to change rates unless inflation or growth moves sharply off course. The brokerage said the more likely policy lever is liquidity management, not interest-rate cuts or hikes, after the RBI kept its stance neutral and signalled comfort with the current balance between price stability and economic momentum.
That reading comes after the central bank revised its fiscal 2026-27 outlook, lifting growth expectations and trimming its inflation forecast. Different reports on the policy update put the RBI’s gross domestic product projection at 6.6% to 6.7%, while inflation is seen at 5% to 5.1%. The RBI governor, Sanjay Malhotra, said private consumption and investment remain firm, but weather patterns, including a sub-normal monsoon and the risk of El Niño, could still push prices higher.
Underlying inflation trends, however, appear to have given policymakers room to pause. JM Financial said core inflation has eased enough to reduce the case for further tightening, even though headline prices have edged up. The brokerage added that the RBI is still watching for second-order effects, particularly any pressure on manufacturing margins, but does not see broad-based inflation building at this stage.
External risks remain the main reason the RBI has not sounded more confident. The central bank flagged tensions in West Asia, trade uncertainty linked to US tariffs and wider global growth worries, while also noting that domestic output has remained resilient. The RBI said recent trade arrangements could help cushion the external account, but it also warned that energy costs, supply disruptions and weather-related shocks may yet alter the outlook. On that basis, JM Financial said the RBI is more likely to use liquidity tools to fine-tune financial conditions, with a prolonged pause now the base case.
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