RBI MPC Meeting: Governor Sanjay Malhotra Keeps Repo Rate Unchanged At 5.25%

RBI MPC Meeting: The Reserve Bank of India (RBI)'s Monetary Policy Committee kept the repo rate unchanged at 5.25%, announced the RBI Governor Sanjay Malhotra, on Wednesday, August 5. The status quo move came after the completion of a three-day policy meeting which started earlier this week.

"After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC decided unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent," said RBI Governor Sanjay Malhotra.

The standing deposit facility (SDF) rate also remained unchanged at 5% and the marginal standing facility (MSF) rate and the bank rate remained at 5.5%. The MPC decided to continue with the neutral stance.

The RBI revised its Gross Domestic Product (GDP) growth forecast to 6.7% from the earlier projection of 6.6%. With this, the Q1FY27 growth is estimated to be at 7% from 6.6%. Whereas Q2FY27 GDP growth stood at 6.4% from 6.3%. The RBI retained its Q3 and Q4 growth projections at 6.5% and 6.8%. The RBI also revised its headline consumer price index (CPI) inflation projection for FY27 to 5.0%.

Meanwhile, inflation in June surged above the central bank's medium-term target amid geopolitical uncertainties stemming from tensions in West Asia and a weak global outlook. Given crude oil price volatility, there was broad consensus that the RBI would keep the repo rate unchanged at 5.25% after its August meeting.

Repo Rate And Inflation Concerns

The RBI MPC decided to keep the benchmark repo rate unchanged at 5.25% in its previous meeting as well as it maintained a cautious "wait and watch" approach while assessing the economic impact of rising geopolitical tensions in West Asia.

In-line with the MPC's revised inflation target for the year 2026, consumer price index (CPI) inflation inched higher in June. The CPI inflation, although, came 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, which was its highest mark for the first time in 17 months and it moved above the RBI's medium-term target of 4%.

World Central Banks Raising Rates

Central banks of different countries across the world opted an hawkish stance and opted to increase rates. Whether it is Australia, Singapore, Europe, Australia or Indonesia, central banks across the world opted to raise benchmark interest rates in recent months amid rising geopolitical uncertainty and inflation concerns.

US Fed Rate Stance

Last week, the US Federal Reserve announced its decision to keep the benchmark rates unchanged at a range of 3.5% to 3.75%. While market experts were anticipating the Federal Open Market Committee to keep the repo rate on hold, there are indications that the Fed will consider a rate hike this year.