RBI Holds Repo Rate at 5.25%, Signals Upbeat Growth
RBI Holds Repo Rate at 5.25%, Signals Upbeat Growth
RBI keeps the repo rate at 5.25% and maintains a neutral stance as growth momentum strengthens and inflation stays within target, with FY26 GDP growth revised higher.
The Monetary Policy Committee (MPC) of the Reserve Bank of India decided to keep the benchmark repo rate unchanged at 5.25% and retained its neutral policy stance, signaling confidence in India’s growth momentum even as global uncertainties remain elevated. The decision follows cumulative rate cuts of 125 basis points since February 2025, including a 25 basis point reduction in December, and a pause now to assess how earlier easing measures are transmitting through the economy.
Inflation is expected to stay within the comfort zone, with CPI inflation projected at 2.1% for FY26. It is anticipated to rise to 3.2% in Q4FY26, then to 4% in Q1FY27 and 4.2% in Q2FY27, remaining within the central bank’s tolerance band of 2-6%. On the growth front, the MPC lifted its real GDP growth forecast for FY26 to 7.4% from 7.3% earlier, with projected growth of 6.9% in Q1FY27 and 7% in Q2FY27, indicating sustained momentum.
Food inflation has been benign, aided by healthy kharif output, favorable rabi sowing, and adequate buffer stocks. However, upside risks persist from geopolitical tensions, volatile energy prices, and potential adverse weather conditions. The MPC noted that ongoing trade deals with the United States and the European Union, along with domestic policy measures, support a favorable outlook and help manage external headwinds. The decision to pause is framed as a way to monitor how quickly the earlier cuts pass through to lending rates and real activity.
Overall, the policy stance reflects cautious optimism: growth is brightening, inflation is expected to stay within target, and monetary ease has likely run its course for now, with the central bank ready to act if the outlook deteriorates. Investors and borrowers should watch transmission and the evolving global environment for further guidance.
