RBI Keeps Repo Rate Unchanged At 5.25% As Inflation Stays Below Target

The Reserve Bank of India (RBI) on Friday kept the benchmark repo rate unchanged at 5.25 per cent and retained its "neutral" monetary policy stance, citing uncertainties in the global economic environment and inflation outlook.

Announcing the decisions of the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said the central bank has adopted a cautious approach amid heightened market volatility and geopolitical tensions, particularly the ongoing conflict in West Asia.

"The global economic outlook remains clouded. We remain confident to withstand these shocks, with minimum pain," Malhotra said while unveiling the MPC's policy decisions.

Explaining the rationale behind maintaining the neutral stance, the Governor said the committee considered uncertainties surrounding the duration and intensity of the West Asia conflict, its spillover effects on global markets, and the pace of supply-chain restoration.

"The MPC felt it was prudent to wait for greater clarity to emerge and accordingly chose to continue with a neutral stance," he said.

On inflation, Malhotra noted that headline Consumer Price Index (CPI) inflation remained below the RBI's target of 4 per cent in recent months. CPI inflation stood at 3.4 per cent in March and 3.5 per cent in April 2026.

While food inflation has shown signs of edging up, fuel inflation remained subdued as fuel prices largely stayed unchanged during the period, he said. Core inflation, which excludes food and fuel, remained stable at 3.7 per cent.

However, the Governor cautioned that the food inflation outlook remains uncertain. He also pointed out that the impact of higher fuel prices is beginning to be reflected in the economy.

"The food outlook remains uncertain, and the pass-through of higher fuel prices is now becoming visible," Malhotra said.

The RBI also revised its growth outlook for the current financial year. Real GDP growth for FY27 has been projected at 6.6 per cent, lower than the earlier estimate of 6.9 per cent.

The central bank's decision to maintain the status quo on rates comes amid a delicate balancing act between supporting economic growth and ensuring inflation remains within the target range.

The repo rate is the rate at which the RBI lends short-term funds to commercial banks and serves as a key benchmark for borrowing costs across the economy.