RBI's MPC keeps repo rate unchanged at 5.25%, retains neutral stance

The central bank raised its inflation forecast to 4.6 per cent and flagged risks from West Asia tensions, while projecting GDP growth at 6.9 per cent for the current financial year

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged at 5.25 per cent, while maintaining its monetary policy stance at neutral.

 

Why did RBI keep rates unchanged?

 

This marks the second consecutive policy review where the MPC has held rates steady, after cutting the benchmark rate by 125 basis points since February 2025.

 

RBI Governor Sanjay Malhotra said ongoing geopolitical tensions and global uncertainty warrant caution.

 

What is RBI’s inflation outlook?

 

The central bank revised its consumer price index (CPI) inflation forecast for FY27 upward to 4.6 per cent from 4 per cent earlier.

 

 

Quarterly projections are:

 

Q1: 4 per cent

Q2: 4.4 per cent

Q3: 5.2 per cent

Q4: 4.7 per cent

 

For the first time, the RBI also introduced a core inflation estimate of 4.4 per cent, which it will publish regularly going forward.

 

Malhotra cautioned that geopolitical tensions in West Asia and heightened uncertainty pose upside risks to inflation.

 

What is the growth outlook?

 

India’s gross domestic product (GDP) growth for the current financial year is projected at 6.9 per cent.

 

Quarterly estimates are:

 

Q1: 6.8 per cent

Q2: 6.7 per cent

Q3: 7 per cent

Q4: 7.2 per cent

 

The RBI flagged downside risks to growth from supply chain disruptions and the ongoing conflict.

 

What risks has RBI highlighted?

 

Despite the current ceasefire, the central bank warned of potential escalation or spillover of the West Asia conflict, along with volatility in global financial markets and weather-related disruptions.

 

“As a result, risks to the baseline outlook remain tilted to the downside, with uncertainty continuing to remain elevated,” Malhotra said. 

 

How did markets react?

 

Government bond yields rose marginally by 4 basis points after the policy announcement, reversing part of the earlier decline seen in morning trade.