RBI MPC Meeting August 2026 Preview: Will RBI Keep Repo Rate Unchanged Again? Inflation, Global Risks in Focus

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) began its three-day policy meeting on Monday. While inflation has edged above the central bank's medium-term target and geopolitical uncertainties continue to cloud the global outlook, the overwhelming consensus among economists is that the RBI will maintain the repo rate at 5.25% for now.

RBI MPC August 2026 Meeting: Will Repo Rate Stay at 5.25%? Check Preview

The Monetary Policy Committee's decision will be announced by RBI Governor Sanjay Malhotra on August 5.

The central bank is expected to adopt a cautious, data-driven approach as it weighs domestic inflationary pressures against the need to support economic growth. Although several global central banks have tightened monetary policy in recent months, experts believe the RBI is unlikely to rush into any policy action unless inflationary risks become more persistent.

Most economists believe the current economic environment supports policy stability rather than immediate action. "We expect MPC to adopt a cautious tone amid ongoing war-related uncertainties, while reiterating a data-dependent approach for future policy decisions. For the August meeting, we expect a status quo, with the policy rate maintained at 5.25%," said Prachi Kele, Lead Economist, PL Capital.

The benchmark repo rate currently stands at 5.25%, where it has remained since the RBI's June 2026 monetary policy review. At that meeting, the central bank chose to leave rates unchanged and retained a cautious "wait-and-watch" approach while assessing the economic impact of rising geopolitical tensions in West Asia.

Instead of making immediate changes to borrowing costs, policymakers are expected to closely monitor incoming economic data, inflation trends and external developments before deciding on future rate moves.

"We expect the MPC to maintain the policy rate at its current level, balancing growth with macroeconomic stability amid an evolving global environment......... Looking ahead, maintaining a prudent monetary stance while keeping inflation under control will be critical to fostering long-term economic growth," said Mr. Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India.

Inflation and Global Risks Keep RBI on Guard

Although India's inflation remains within the RBI's tolerance band of 2% to 6%, price pressures have started to increase again. Retail inflation accelerated to 4.38% in June, marking the first time in 17 months that it moved above the RBI's medium-term target of 4%.

At the same time, core inflation, which excludes volatile food and fuel prices, has remained broadly stable near 4%, suggesting that underlying price pressures are still relatively contained.

Oil Prices, Monsoon Risks and Global Uncertainty Could Influence RBI's Repo Rate Decision

Several external factors continue to complicate the inflation outlook. Volatile crude oil prices, geopolitical tensions in West Asia, concerns surrounding the US-Iran conflict and disruptions to shipping routes through the Strait of Hormuz and the Red Sea all pose risks to imported inflation.

Domestic factors also remain under close watch. Food inflation could be affected by monsoon performance, agricultural output and possible weather disruptions linked to El Nino. If food prices rise sharply over the coming months, inflationary pressures could remain elevated for longer.

Price increases announced by several companies could also add to inflation if higher input costs are passed on to consumers, leaving the RBI with limited room to consider any rate cuts.

"A favourable response to FCNR(B) measures, improving FPI inflows as the AI- and semiconductor-led equity rally cools amid improved kharif sowing support the thesis for a pause. Food inflation is likely to remain contained in FY27 as El Niño risks recede and monsoon conditions remain favourable, while growth risks stay broadly balanced," said Prachi Kele, PL Capital.

World's Central Banks Are Raising Rates- Will RBI Stay on Hold?

Several major central banks, including those in Europe, Australia, Indonesia, the Philippines, Singapore, South Korea and South Africa, have raised benchmark interest rates in recent months amid rising geopolitical uncertainty and inflation concerns. However, the US Federal Reserve and the Bank of Japan have continued to keep policy rates unchanged.

Economists believe the RBI is also likely to prioritise India's domestic economic conditions over global policy actions. While international developments remain important, the central bank's decisions will largely depend on India's inflation trajectory, liquidity conditions, economic growth and financial stability.

RBI Unlikely to Hike Rates Despite Persisting Inflation Risks

Despite inflation moving above the RBI's 4% target, economists do not expect an interest rate hike at this stage. According to experts, underlying inflation remains broadly under control despite recent increases in headline inflation.

"Although core and underlying inflation have risen modestly, they remain within the RBI's comfort zone. Consequently, a rate hike is unlikely in 2026 unless core inflation sustains above 4.5%," Samiran Chakraborty, Citi's Chief India Economist, said in a note.

This suggests the central bank is likely to remain patient unless inflation becomes more broad-based and persistent over the coming months.

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