With the retail inflation down, if the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) pause on the policy rate hike or increase it by 25 basis points to 6.50 per cent will be known on February 8.The RBI’s MPC will be meeting to decide on the rates.Inflation has come down substantially over the last three months and showing further downward momentum. External conditions have also eased with slower rate hikes in the US. The RBI’s foreign exchange reserves have also increased over the last few months. All these developments should provide comfort to the RBI. We expect the RBI will pause the rate hiking cycle in the February meeting and will maintain the repo rate at 6.25 per cent for extended period. It might also change the policy stance to neutral, said Pankaj Pathak, Fund Manager- Fixed Income, Quantum AMC.According to Pathak, the bond market should react positively. ‘We expect bond yields to go down gradually though elevated bond supply will limit the downside of yields.’ Retail inflation for December 2022 fell to a year’s low of 5.72 per cent, mainly due to low food prices, especially those of fruits and vegetables.This was the second consecutive month when it has remained within the RBI’s tolerance band of 2 per cent to 6 per cent. However, economists are worried as the core inflation remains on the higher side.The consumer price index (CPI) based inflation was at 5.88 per cent in November 2022, according to data released by the Ministry of Statistics and Programme Implementation on Thursday. In October 2022, it was at a higher band of 6.77 per cent.