India Economics Weekly: Using DB AI to decode terminal repo rate

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India Economics Weekly: Using DB AI to decode terminal repo rate

Deutsche Bank

Research

Economics Date

India Economics Weekly 30 June 2026

Using DB AI to decode terminal repo rate

Kaushik Das

In this report, we use DB’s proprietary AI tools to decode the evolving reaction Chief Economist

function of India’s Monetary Policy Committee and assess whether an AI-based +91-22-7180-4909

reading of MPC minutes can help quantify the likely terminal repo rate under

alternative scenarios for growth, inflation and the Fed policy path. The exercise is

especially useful because the same six MPC members have participated in the

policy meetings from October 2025 through June 2026, allowing us to track a

consistent panel of individual views over time. This gives the analysis a cleaner

behavioural foundation compared to a simple meeting-by-meeting commentary.

The key conclusion is encouraging: the AI tool’s assessment broadly aligns with

DB’s baseline view that the RBI is likely to deliver 50 bps of repo-rate hikes in

October-December 2026 and another 50 bps in April-June 2027, taking the

terminal repo rate to 6.25%. The AI tool arrives at this conclusion not by

mechanically reacting to higher inflation, but by reading the MPC’s evolving

language on inflation persistence, second-round effects, inflation expectations,

real interest rates, external stability and the Fed policy backdrop.

The analysis shows that the MPC has moved through four distinct phases.

October 2025 was still a dovish pause, with benign inflation opening space to

support growth, although the committee preferred to wait rather than ease

immediately. December 2025 was the clear easing point, with the MPC cutting

the repo rate by 25 bps to 5.25% while keeping the stance neutral. February 2026