MPC holds policy rate at 5.25%, revises growth projection upwards, FY26 inflation outlook at 2.1%

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) after a detailed assessment of the evolving macroeconomic conditions and the outlook, on Friday voted unanimously to keep the policy repo rate unchanged at 5.25%. The MPC also decided to continue with the neutral stance.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI)  on Friday voted unanimously to keep the policy repo rate unchanged at 5.25%. The MPC also decided to continue with the neutral stance.

“The MPC noted that since the last policy meeting, external headwinds have intensified though the successful completion of trade deals augurs well for the economic outlook. Overall, the near-term domestic inflation and growth outlook remain positive,” RBI Governor Sanjay Malhotra said in his Monetary Policy Statement on the rationale behind the decision.  

“The revised outlook for CPI inflation in Q1:FY27 and Q2 at 4% and 4.2% , respectively, continues to be benign and near the inflation target. The slight upward revision in the inflation outlook is primarily due to increase in prices of precious metals, which contribute about 60-70 basis points. The underlying inflation continues to be low,” he said.

“On the growth front, economic activity remains resilient. The growth outlook remains favourable. The MPC is of the view that the current policy rate is appropriate. Going forward, the MPC will be guided by the evolving macroeconomic conditions and the outlook based on data from the new series in charting the future course of monetary policy,” he added.

Taking various factors into consideration, real GDP growth projections for Q1:FY27 and Q2 are revised upwards to 6.9% and 7%, respectively. The risks are evenly balanced. “We are deferring the projections for the full year to the April policy as the new GDP series will be released later in the month,” he said.

Stating that core inflation, barring potential volatility induced by prices of precious metals, is expected to be range-bound, he said geopolitical uncertainty coupled with volatility in energy prices and adverse weather events pose upside risks to inflation.