The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged at 5.25 percent, amid the renewed West Asia crisis and rising inflation pressures.
The MPC also retained its ‘neutral’ policy stance. The Standing Deposit Facility (SDF) rate remains at 5 percent, while the Marginal Standing Facility (MSF) rate and the Bank Rate stay unchanged at 5.50 percent.
The RBI also raised its FY27 GDP growth forecast by 10 basis points to 6.7 percent.
RBI Governor Sanjay Malhotra expressed confidence that strong domestic demand would continue to support growth, noting that the economy remains backed by resilient domestic demand, steady expansion in manufacturing and services activity, and robust exports.
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He said underlying inflation reflected by core inflation excluding precious metals has stayed benign for some time and is expected to align with core inflation towards the end of the financial year.
While headline inflation is projected to rise, Malhotra said the increase is mainly driven by supply-side pressures from food and fuel. He added that realised inflation in the first quarter came in marginally lower than earlier projections, reflecting limited pass-through of cost pressures.
The recent uptick in inflation, he said, has largely been driven by food and fuel prices, with little sign of broader price pressures so far. Headline inflation is expected to rise further in the near term and peak in the third quarter of FY27, primarily due to food and fuel, before easing thereafter. Excluding precious metals, underlying inflation remains benign and in line with earlier projections.
“The outlook, however, is hazy because of the uncertainties regarding South’s global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action,” Malhotra said.
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