RBI MPC keeps repo rate at 5.25%, retains neutral stance amid global risks

The RBI retained its neutral monetary policy stance while revising its FY27 inflation forecast to 5 per cent and raising its economic growth projection to 6.7 per cent

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. The domestic rate-setting panel also decided to retain the monetary policy stance at neutral.

 

“Looking ahead, the turbulent global economic environment is likely to have some bearing on domestic economic activity. Energy prices and supply chain pressures remain elevated and uncertain. The adverse impact is being contained with various supply-side measures. Even though the situation is still evolving, deficient and uneven south-west monsoon amidst El Niño conditions poses some risks to agriculture sector’s outlook and rural demand,” said Sanjay Malhotra, Governor, Reserve Bank of India.

 

 

The central bank revised its inflation forecast for the financial year ending March 2027 to 5 per cent, with Q2 at 4.7 per cent, Q3 at 5.9 per cent and Q4 at 5.5 per cent. Headline retail inflation averaged 3.9 per cent in the June quarter, below the RBI’s projection of 4.2 per cent, but wholesale price inflation averaged 9.3 per cent over the same period, pointing to rising input-cost pressures.

 

“Even though headline inflation is projected to increase, it is primarily on account of supply-side pressures caused by food and fuel; it is not getting broadbased; core inflation remains moderate and is expected to decline after peaking in Q3,” said Malhotra.

 

The RBI also revised its growth forecast for the current financial year to 6.7 per cent, with Q1 at 7.0 per cent, Q2 at 6.4 per cent, Q3 at 6.5 per cent and Q4 at 6.8 per cent. The RBI had lowered its Q1 FY27 gross domestic product growth projection to 6.6 per cent from 6.9 per cent over the previous three policy reviews, citing uncertainties arising from the West Asia conflict.