ICRA Sees Extended Pause In Interest Rates
Rating agency ICRA expects the Reserve Bank of India to keep policy interest rates unchanged for an extended period unless economic growth slows meaningfully. The outlook follows the recent move by the central bank to reduce the repo rate by 25 basis points, bringing it to 5.25 per cent. The agency noted that the rate-cut cycle now appears to be largely complete unless future data signals a sharper moderation in growth.
Growth And Inflation Indicators Support Stability
ICRA observed that economic indicators remain supportive of a policy pause. Real GDP growth is projected at around 7.3 per cent in FY26, driven by domestic demand and government-led capital spending. The inflation forecast for FY26 has been revised lower, easing concerns about price pressures. With both variables showing a favourable trend, the agency believes there is little urgency for further rate reductions.
Liquidity Measures May Continue
Even if key policy rates remain unchanged, ICRA expects the central bank to maintain comfortable liquidity conditions through tools such as open market operations. This is aimed at ensuring financial market stability without additional rate action. The agency also pointed out that global interest rate trends and crude oil prices will remain important factors in determining the future path of monetary policy.
Growth Slowdown Remains Key Trigger
According to ICRA, only a material slowdown in activity could trigger reconsideration of the policy stance. For now, the agency expects a prolonged pause, with the central bank watching incoming data on growth, inflation and external risks before making further decisions.
