RBI hits pause button again! Repo rate remains unchanged at 5.25% amid global turmoil

The Standing Deposit Facility (SDF) rate was kept at 5 percent, while the Marginal Standing Facility (MSF) rate and the bank rate were retained at 5.5 percent following the 61st meeting of the Monetary Policy Committee (MPC).

Economists had widely expected the central bank to maintain status quo on rates as geopolitical tensions, elevated crude oil prices, and concerns over inflation continue to weigh on the global and domestic economic outlook.

Growth and inflation outlook

The RBI projected real GDP growth for 2026-27 at 6.6 percent, with quarterly growth estimates of:

• Q1: 6.6 percent
• Q2: 6.3 percent
• Q3: 6.5 percent
• Q4: 6.8 percent

The central bank noted that headline Consumer Price Index (CPI) inflation rose to 3.4 percent in March and 3.5 percent in April 2026, mainly due to higher food prices.

For 2026-27, CPI inflation is projected at 5.1 percent, with:

• Q1: 4.2 percent
• Q2: 5.1 percent
• Q3: 5.9 percent
• Q4: 5.4 percent

Core inflation is projected at 4.7 percent for the fiscal year.

Governor flags global risks

In his policy statement, RBI Governor Sanjay Malhotra said the global economic outlook remains uncertain due to the continuing geopolitical impasse in West Asia.

"Global economic outlook remains clouded by the continuing geopolitical impasse in West Asia, as sharply escalating energy prices and global supply chain disruptions continue to hinder economic activity. Faced with difficult trade-offs, monetary policy has turned more cautious," he said.

Malhotra noted that major advanced economy central banks are likely to pivot towards monetary tightening, while inflation concerns and debt sustainability risks continue to pressure global bond markets.

"While equity markets remain buoyant driven by AI-fuelled optimism, global bond markets remain bearish amidst renewed inflation fears and continuing debt sustainability concerns. Risk-off sentiments and safe-haven demand are imparting volatility to forex markets, with a depreciating trend in many emerging market economy currencies," he added.