RBI holds repo rate at 5.25 percent unanimously
The Reserve Bank of India's Monetary Policy Committee (MPC) unanimously voted to keep the policy repo rate unchanged at 5.25 percent. The decision was made during its 61st meeting held from June 3 to 5, 2026.
Unanimous hold amid global headwinds
The Monetary Policy Committee (MPC) unanimously voted to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 percent.
Consequently, the standing deposit facility (SDF) rate remains at 5.00 percent, and the marginal standing facility (MSF) rate and Bank Rate at 5.50 percent.
The MPC also decided to continue with its neutral stance.
This decision comes as the West Asia conflict prolongs, increasing risks to global inflation and growth, with major advanced economy central banks likely to tighten.
Domestically, economic activity remained steady, supported by resilient private consumption and fixed investment momentum.
Real GDP growth for 2026-27 is projected at 6.6 percent.
Headline CPI inflation inched up to 3.5 percent in April 2026, primarily due to higher food inflation.
Retail fuel price increases since May imply a direct impact of about 36 basis points on headline inflation.
CPI inflation for 2026-27 is projected at 5.1 percent.
Waiting for clarity on inflation path
The MPC's decision reflects a detailed assessment of evolving macroeconomic and financial developments.
While global conditions have deteriorated due to the West Asia conflict and elevated energy prices, domestic CPI inflation remains below target, with limited pass-through so far.
Projections indicate headline inflation firming towards the upper tolerance level in Q3 2026-27, with potential second-round effects.
The outlook is further clouded by a sub-normal south-west monsoon forecast and El Niño risks.
Despite amplified inflation risks, the MPC felt it prudent to await greater clarity, remaining data-dependent and closely monitoring developments, including supply-side pressures and inflation expectations.
Prudence over pre-emption
The MPC's decision reflects a cautious approach, prioritizing stability amidst complex global and domestic uncertainties.
While inflation risks are acknowledged, the unanimous hold suggests confidence in current policy settings to navigate potential shocks.
This stance allows for greater flexibility, enabling the central bank to react decisively once the economic outlook gains clearer direction.