No interest rate cut in RBI's Feb policy review, or anytime in FY26: Axis Bank's Mishra

Economist predicts no rate cut for RBI in FY26 due to inflation, emphasizes need for decisive action for growth.

The elevated inflation does not offer the Reserve Bank any space for an interest rate cut in the next policy review in February and the whole of FY26 as well, a senior economist said on Wednesday.

Axis Bank's chief economist Neelkanth Mishra, who is also a part-time member of the Economic Advisory Council to the Prime Minister, stressed that a change of guard at RBI will not result in any veering off and added that the institutional ability is very strong.

A rate cut will not be possible for the "next 13-14 months" due to the inflation outlook, he said, adding that the average inflation for FY26 will be 4.5%.

Except the third quarter of FY26, where the headline number will cool down to the 4% target of RBI on a higher base, the headline number will be between 4.5-5% all through the end of FY26 leaving little space for a rate cut, he told reporters here.

Even if the RBI cuts rates with an eye on propping-up growth, a 0.50% decline in its key rates will not be a "decisive" move to help the growth process, he said.

"When you move to cut rates, it should be a decisive one. 0.50% is neither here neither there," he said.

Unlike some economists, who believe the GDP growth at seven-quarter low of 5.4% has led to a dip in the trend growth, Mishra said he still considers 7% to be the trend growth and added that the country will achieve it in FY26 after a 6.6 per cent growth in FY25.