&imwidth=800&imheight=600&format=webp&quality=medium "RBI holds repo rate at 5.25%, retains neutral stance amid inflation risks")
The Reserve Bank of India's Monetary Policy Committee (MPC) on Wednesday (Aug 5) kept the benchmark repo rate unchanged at 5.25 per cent, while retaining its neutral policy stance, signalling caution amid rising inflationary pressures.
Announcing the MPC's decision, RBI Governor Sanjay Malhotra said the committee had unanimously decided to leave the policy rate unchanged. The central bank flagged that headline inflation has moved above its target and is expected to remain elevated in the near term, with food and fuel prices emerging as the key drivers of price pressures.
Key highlights
- Repo rate unchanged at 5.25%
- Policy stance retained as “neutral”
- Headline inflation has risen above the RBI's target
- Food and fuel prices are adding to inflationary pressures
- Headline inflation expected to remain elevated in the near term
Inflation remains above target
The central bank flagged rising inflation as a key concern, noting that headline inflation has moved above the RBI's target. Governor Malhotra said food and fuel prices continue to add pressure to inflation, with headline inflation expected to remain elevated in the near term.
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The RBI projected consumer price inflation at 5 per cent for the current financial year, while core inflation is expected to average 4.3 per cent.
Growth outlook revised upward
Despite inflation concerns, the RBI marginally raised its growth forecast for the current fiscal year. The central bank now expects real GDP growth at 6.7 per cent, an increase of 10 basis points from its previous estimate, reflecting resilience in domestic economic activity.
Global risks remain
The RBI cautioned that external uncertainties continue to pose risks to India's growth trajectory.
It identified the ongoing conflict in West Asia, volatility in international financial markets and weather-related disruptions as key factors that could weigh on economic activity in the months ahead.
By maintaining both the repo rate and its neutral stance, the central bank indicated it remains focused on balancing inflation control with sustaining economic growth as global and domestic uncertainties persist.
