Repo rate held at 5.25 percent in unanimous vote
The Reserve Bank of India's Monetary Policy Committee voted unanimously to keep the policy repo rate unchanged at 5.25 percent and maintain a neutral stance. Real GDP growth for 2026-27 is projected at 6.7 percent, while headline CPI inflation is expected to average 5.0 percent.
Steady rates amid supply pressures
The MPC unanimously decided to hold the policy repo rate at 5.25 percent, maintaining the standing deposit facility rate at 5.00 percent and the marginal standing facility rate at 5.50 percent.
All six members—Governor Sanjay Malhotra, Nagesh Kumar, Saugata Bhattacharya, Ram Singh, Indranil Bhattacharyya, and Poonam Gupta—voted for status quo and a neutral stance.
Headline CPI inflation is projected at 5.0 percent for 2026-27, peaking at 5.9 percent in Q3 due to food and fuel cost pressures before moderating.
Real GDP growth was revised up by 10 basis points to 6.7 percent, supported by resilient urban consumption, expanding services, and robust private investment despite monsoon risks and West Asia conflicts.
External shocks and tariff headwinds
Global geopolitical tensions in West Asia and volatile crude oil prices continue to blur the inflation trajectory, while trade uncertainties have intensified following new US tariffs on Indian exports.
Despite these external pressures, core inflation excluding precious metals remains benign at 2.5 percent, demonstrating limited pass-through into broader prices.
Inflows through foreign currency swaps and portfolio investments have helped stabilize the rupee, limiting imported inflation risks.
A prudent pause, not a freeze
Holding rates is a sensible move while inflation remains driven by supply-side energy and food shocks.
Yet, maintaining a neutral stance risks delaying necessary tightening if elevated input costs pass into core inflation.
The committee must act decisively at the first sign of price pressures becoming generalized.