RBI MPC Holds Repo Rate At 5.25%, Balances Confidence With Caution On Global Uncertainty

Higher energy prices, firm bond yields, and a stronger US dollar are adding pressure on global growth while complicating inflation management. India’s economy showed resilience in 2025–26, with GDP estimated to grow at 7.6 per cent, supported by strong private consumption and investment. However, the central bank projected growth to moderate to 6.9 per cent in 2026–27, citing risks from elevated commodity prices, supply disruptions, and global financial volatility. Continued strength in services, manufacturing, and policy support for domestic production are expected to cushion the impact. Accordingly, the standing deposit facility (SDF) rate remains at 5.00 per cent, while the marginal standing facility (MSF) rate and Bank Rate continue at 5.50 per cent. The MPC also retained its ‘neutral’ stance, signalling flexibility in response to evolving conditions. Retail inflation rose to 3.2 per cent in February 2026, mainly due to base effects, while core inflation remained subdued. For 2026–27, inflation is projected at 4.6 per cent, with risks tilted upwards due to volatile energy prices and potential weather-related disruptions such as El Niño. At the same time, strong agricultural output and stable core inflation provide some relief. The MPC noted that while inflation remains within the target range, uncertainties have increased due to geopolitical tensions and supply shocks. It emphasised a ‘wait and watch’ approach, given the evolving growth-inflation balance. The committee said India’s economic fundamentals remain strong, enabling it to better withstand external shocks, but reaffirmed the need for vigilance. (KNN Bureau)