- Decision
- Maintain
- Rate change
- 0 bps
- policy repo rate
- 5.25%
The Reserve Bank of India’s Monetary Policy Committee unanimously held the policy repo rate at 5.25% and retained its neutral stance, citing supply-led inflation pressures, resilient but slower projected growth and uncertainty around the inflation path. Over the past year, the repo rate was held at 5.50% through October 2025, cut 25 basis points in December and held at 5.25% since. The Reserve Bank of India will conduct two-way liquidity operations to align the weighted average call rate with the repo rate. Consumer price index inflation rose to 4.4% in June and is projected at 5.0% in 2026-27, with food and fuel expected to push headline inflation to a third-quarter peak before moderation, while real gross domestic product growth is forecast at 6.7% and credit growth remains robust. Foreign exchange reserves provide more than 10 months of import cover. The global outlook is clouded by the West Asia conflict, volatile energy prices, disrupted trade routes and supply chains, and fresh US tariffs. The committee said greater clarity on inflation’s path and composition was needed before policy action and pledged to remain vigilant in aligning inflation with the target.
Rate evolution
From June 2025 to August 2026, the Reserve Bank of India lowered the policy repo rate by 75 basis points from 6.00 per cent to 5.25 per cent, front-loading a 50 basis point cut in June, pausing through October, easing again in December and then holding from February through August. The June move reflected sharply softer CPI inflation, a revised-down inflation outlook seen durably aligned with the 4 per cent target and likely to undershoot it marginally, alongside growth that remained below aspirations in a challenging global environment, after which the Monetary Policy Committee shifted the stance to neutral, citing limited remaining space and the need to assess incoming data. The subsequent pause came even as headline inflation turned more benign on food-price disinflation, Goods and Services Tax rate rationalisation and favourable monsoon conditions, because core inflation stayed around 4 per cent, base effects were expected to lift headline inflation later in 2025-26, and the committee wanted more clarity on the transmission of earlier rate cuts and fiscal measures as tariff, trade and geopolitical uncertainties clouded the external outlook.
The Reserve Bank of India cut the policy repo rate by 25 basis points in December as exceptionally benign food prices and subdued underlying inflation gave room to support growth, but held it at 5.25 per cent in February, judging the level appropriate amid resilient domestic growth and an inflation outlook still near target, while flagging external headwinds and commodity-price, weather and geopolitical risks. In April, the committee left the policy repo rate unchanged and maintained the neutral stance as contained headline inflation and muted core pressures were offset by rising energy, weather, supply-chain and second-round inflation risks from the West Asia conflict, and it held again in June as the conflict continued, domestic demand remained resilient and higher fuel and input costs, a sub-normal south-west monsoon forecast and El Niño risks warranted greater clarity. At its August 3 to 5 meeting, the committee unanimously kept the policy repo rate at 5.25 per cent and retained the neutral stance, noting that headline CPI inflation had moved above target mainly because of food and fuel without becoming broad-based, while core inflation excluding precious metals remained benign and growth stayed resilient, but uncertainty over the south-west monsoon, El Niño, geopolitics and global trade policy required more clarity on inflation’s path and composition before any policy action.