RBI MPC keeps repo rate at 5.25%, maintains neutral stance

Mumbai: The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25 percent and retained its neutral policy stance. It also raised India’s FY27 GDP growth forecast to 6.7 percent and lowered its inflation estimate to 5.0 percent from 5.1 percent.Business ConfidenceIMC Chamber of Commerce and Industry President Prof. Mahendra K Chouhan welcomed the decision, saying it balances economic growth with price stability.He said the higher growth forecast reflects strong domestic demand, investment and services activity. Lower inflation expectations and better banking system liquidity could improve the flow of loans to businesses.Chouhan added that a manageable current account deficit and stable financial system show that India’s economic foundation remains strong despite global uncertainty. However, the RBI must continue watching geopolitical tensions, volatile energy prices and uncertainty over US tariffs.Rates May StayShubhada Patil, Founder and Managing Director of Quantace Research, said markets should view 5.25 percent as the main scenario, but not as a guaranteed rate.She expects an extended pause, although the RBI could raise the repo rate to 5.50 percent if crude oil prices rise, the rupee weakens, or core and services inflation becomes more widespread.RBI Revises Deposit Interest Rate Rules, Mandates Uniform Rates & Greater Transparency From October 1According to Patil, a longer rate pause may benefit deposit-rich banks, capital goods and infrastructure companies. A defensive rate increase could hurt NBFCs, real estate, automobiles and consumption linked to loan instalments.Cautious OutlookEmkay Global Financial Services Chief Economist Madhavi Arora described the policy as cautious but constructive. She said the RBI is balancing risks from the Middle East conflict, tighter global financial conditions and El Niño against resilient domestic growth and foreign currency inflows.Arora noted that near-term price pressure may remain supply-driven unless it spreads widely.Will Reserve Bank of India’s 1-Hour Payment Delay Rule Help Curb Rising Digital Fraud In India? Know Key Details HereHousing SupportKnight Frank also welcomed the rate pause. It said stable borrowing costs should improve confidence among homebuyers, businesses and investors. Policy continuity is expected to support finance, housing demand and investment across residential and commercial real estate.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Wednesday unanimously decided to keep the policy repo rate unchanged at 5.25 per cent at its 62nd meeting held from August 3 to 5, 2026.The committee also retained its neutral stance.As a result:Repo rate: 5.25%Standing Deposit Facility (SDF): 5.00%Marginal Standing Facility (MSF): 5.50%Bank Rate: 5.50%RBI MPC members who attended the August 2026 meetingThe meeting was chaired by RBI Governor Sanjay Malhotra. Other members included:Dr Nagesh KumarSaugata BhattacharyaProf Ram SinghDr Poonam GuptaIndranil BhattacharyyaRead more - RBI MPC Meeting at a Glance: Your one-stop guide for all key decisionsWhy did the RBI leave interest rates unchanged?The MPC said it decided to maintain the current policy rate because:Inflation is expected to rise in the near term but remains largely driven by food and fuel prices.Core inflation continues to remain moderate.India's economy remains resilient despite global uncertainties.Greater clarity is needed on inflation, global trade and geopolitical developments before any policy action.The RBI said it will continue to closely monitor macroeconomic developments while remaining committed to bringing inflation towards its target.Read more - RBI's rate, GDP and inflation verdict also comes with a stark warningRBI GDP growth forecast for FY27The central bank projected real GDP growth at 6.7 per cent for 2026-27.Quarterly GDP projectionsQ1: 7.0%Q2: 6.4%Q3: 6.5%Q4: 6.8%Q1 FY28: 7.3%The RBI said risks to growth remain evenly balanced.RBI revises inflation forecastThe RBI projected consumer price index (CPI) inflation at 5.0 per cent for FY27.Quarterly inflation projectionsQ2: 4.7%Q3: 5.9%Q4: 5.5%Q1 FY28: 5.3%The central bank said risks to inflation are also evenly balanced.What is driving inflation, according to the RBI?The RBI noted that headline inflation rose to 4.4 per cent in June 2026, mainly because of higher food and fuel prices.Key observations include:Food inflation increased across most categories during May and June.Fuel inflation rose following higher international energy prices.Core inflation remained at 3.9 per cent during May and June.Core inflation excluding precious metals remained even lower at 2.3-2.5 per cent.The MPC said the rise in inflation is not broad-based and demand-side pressures remain contained.Global risks highlighted by RBI Governor Sanjay MalhotraThe RBI flagged several global developments that continue to pose risks to the economy, including:Ongoing conflict in West Asia.Volatile crude oil prices.Persistent global inflation.Uncertainty surrounding global trade policy.Stronger US dollar and elevated US bond yields.Fragile public finances in major economies.The central bank said these factors continue to cloud the global economic outlook.Domestic economy remains resilientAccording to the RBI, India's economy continues to perform well despite external challenges.Key positives highlighted by the MPC include:Strong private consumption.Resilient investment activity.Healthy manufacturing and services sectors.Robust exports.Stable employment conditions.Continued government infrastructure spending.Strong credit growth.The RBI said these factors reaffirm India's position as the world's fastest-growing major economy.El Niño and monsoon remain key concernsThe central bank cautioned that deficient and uneven south-west monsoon conditions associated with El Niño could affect agriculture and rural demand.However, it said government initiatives such as crop diversification, climate-resilient farming and water conservation are expected to help reduce the impact.What's next for RBI monetary policy?The MPC said the outlook remains uncertain because of:Inflation risks.El Niño and monsoon conditions.Geopolitical tensions.Global trade uncertainty.It said future policy decisions will depend on how inflation and growth evolve over the coming months.The minutes of the August MPC meeting will be released on 19 August 2026, while the next RBI MPC meeting is scheduled to take place from 5 to 7 October 2026.

The Reserve Bank of India (RBI) on Wednesday kept the benchmark repo rate unchanged at 5.25%, extending its pause for a fourth consecutive policy meeting.The Monetary Policy Committee unanimously extended its wait and watch approach as policymakers continue to weigh persistent geopolitical uncertainties, volatile crude oil prices and emerging inflationary pressures against resilient domestic economic growth.The decision, announced by RBI Governor Sanjay Malhotra, marks another policy review since the RBI's last rate cut in December last year, with the central bank warning that global developments, particularly in West Asia, could complicate the inflation outlook.The six-member MPC left the Standing Deposit Facility (SDF) rate unchanged at 5% and the Marginal Standing Facility (MSF) rate and Bank Rate at 5.5%.RBI MPC Live: Catch all the latest announcementsAlong with the policy decision, the RBI also announced to continue its neutral stance, while noting that core inflation, excluding precious metals, continues to be benign, as projected earlier.Headline inflation is expected to rise further in the near term, Malhotra said.The central bank had left the repo rate unchanged in June after raising its FY27 retail inflation forecast to 5.1% from 4.6%, citing higher input costs due to the pass-through of elevated global energy prices to petrol and diesel. It had simultaneously lowered its FY27 GDP growth projection to 6.6% from 6.9%.Global uncertainty remains the key concernThe global backdrop remains uncertain, with recurring flare-ups in the West Asia conflict keeping markets on edge over the security of energy supplies.Apart from concerns around the Strait of Hormuz, policymakers have also been monitoring developments around the Bab el-Mandeb Strait and the Red Sea, both of which remain critical global shipping routes. Any disruption could increase freight costs and push up imported inflation.Crude oil prices have remained volatile amid geopolitical developments, although weaker Chinese crude demand and inventory drawdowns have moderated price pressures. Tariff-related uncertainties have also resurfaced globally, while several major central banks have been mulling policy tightening.Domestically, inflation risks have also increased. Food prices have started firming up due to seasonal factors and monsoon-related uncertainties, while economists continue to monitor the possibility of weather disruptions affecting agricultural output.Also Read: MPC's external members must have the courage to dissent, disagreement drives course correctionAt the same time, high-frequency indicators suggest domestic economic activity has remained resilient, with economists expecting India's GDP growth in the April-June quarter to remain in the 7.1-7.3% range.Analysts had largely pencilled in a pauseAhead of the policy decision, economists had overwhelmingly expected the MPC to maintain status quo, arguing that global uncertainty and inflation risks outweighed the case for any immediate policy action."The credit policy comes at a time when global uncertainty still exists and there is little clarity on when the war will end. Therefore, crude oil prices and currency will remain volatile and rather hard to conjecture,” said Madan Sabnavis, Chief Economist, Bank of Baroda.“At the same time, we have seen inflation inching upwards and it does look like that it will continue to move in the upward direction as food prices have started rising partly due to the season effects as well as monsoon,” he said.Sabnavis added, “Growth on the other hand, going by high frequency indicators, is steady. Against this background, the MPC is likely to maintain status quo on repo rate as well as the stance."Dipti Deshpande, Senior Director and Principal Economist, Crisil Ltd, also expected policymakers to wait for greater clarity before making any policy move."While the MPC may acknowledge emerging inflationary risks, we believe it will prefer to wait for greater clarity on the implications of two key shocks, namely the prolonged conflict in West Asia and ongoing monsoon uncertainties, for the growth-inflation dynamic. Both factors pose risks to the growth and inflation outlook, presenting policymakers with an increasingly delicate trade-off," Deshpande said.CareEdge Ratings had also projected no change in the repo rate, saying the central bank would prefer to assess evolving domestic and global developments before taking any fresh policy action.The agency said geopolitical risks remain elevated due to the unresolved conflict in West Asia, volatile crude oil prices, inflation risks arising from potential El Niño-related disruptions and higher global bond yields. It also said markets would closely watch the RBI's guidance on liquidity management as sustained foreign capital inflows could leave the banking system with surplus liquidity later in the financial year.