MPC keeps repo rate unchanged at 5.25%, retains neutral stance amid uncertainty

Sanjay Malhotra, Governor of the Reserve Bank of India

The RBI’s Monetary Policy Committee voted unanimously to hold the policy repo rate steady at 5.25 %, maintaining its neutral stance, and pointed to uncertainties surrounding the southwest monsoon, El Niño, geopolitical events, and global trade policy.

This decision, made at the latest MPC meeting, represents the fourth successive policy review where the repo rate stayed unchanged, and the neutral stance has now been held for seven meetings in a row.

In conjunction with the policy decision, the RBI lowered its FY27 CPI‑based inflation forecast to 5.0 % from 5.1 %, and nudged its real GDP growth estimate up slightly to 6.7 % from 6.6 %.

Speaking at the post‑policy press briefing, RBI Governor Sanjay Malhotra said the central bank considers itself neither dovish nor hawkish.

“We believe this rate suits the current growth‑inflation environment and our forecast. Considerable uncertainty remains, which will unfold as expected. The monetary‑policy framework is clear.”

“There should be no confusion about the framework. Our aim is headline inflation, not core inflation that excludes precious metals. We will continue to use headline inflation as our guide, striving to align it with the 4 % target.”

Malhotra noted that the anticipated increase in inflation mainly comes from food and fuel supply‑side factors, not from widespread demand pressures. He added that although economic growth remains solid, it is expected to slow in FY27.

Weather Factors

The Governor emphasized that uncertainties around weather, geopolitics, and global trade call for caution before any policy change. He added that any future action must reflect the evolving growth‑inflation outlook and the normalization of underlying inflation.

Although the RBI trimmed its FY27 inflation forecast slightly, inflation is still expected to stay above 5 % for most of the year. The central bank projects CPI inflation to reach a peak of 5.9 % in Q3 (October‑December), near the MPC’s upper tolerance of 6 %, then fall to 5.5 % in Q4 (January‑March).

Economists are split on the probable policy move if inflation stays high. Gaura Sengupta, Chief Economist at IDFC FIRST Bank, commented, “The RBI’s positive growth outlook and diminishing inflation risks favor a prolonged rate pause through FY27.” Conversely, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, sees room for a 50‑basis‑point increase in the second half of FY27, especially since FY28 Q1 inflation is also forecast to remain above 5 %.

For FY28 Q1, the RBI forecasts CPI inflation at 5.3 % and real GDP growth at 7.3 %, noting that risks are broadly balanced.

Regarding the external sector, Malhotra cautioned that slower global trade growth, higher energy costs, and ongoing trade‑policy uncertainties could enlarge India’s current account deficit in FY27. He added that the India‑UK trade deal, other recent agreements, strong services exports, and healthy remittance inflows should mitigate some of these pressures.

Published on August 5, 2026