RBI Maintains Status Quo on Rates, Adjusts Inflation Outlook

Mumbai: In a decisive move, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has opted to keep the policy repo rate unchanged at 5.5%, maintaining a neutral stance during its 55th meeting. The committee also revised its inflation forecast for FY26 downward to 3.1% from the previous 3.7%, while keeping the growth forecast steady at 6.5%.

Governor Sanjay Malhotra highlighted the committee's unanimous decision, citing current macroeconomic conditions and the need for further transmission of previous rate cuts to the broader economy. The standing deposit facility rate remains at 5.25%, with the marginal standing facility rate and bank rate holding at 5.75%.

Economic Backdrop and Future Projections

The RBI's decision comes against a backdrop of a favorable monsoon season, resilient domestic growth, and easing geopolitical tensions, albeit with lingering global trade challenges. The inflation outlook appears more benign, supported by large favorable base effects, healthy Kharif sowing, and comfortable buffer stocks.

On the growth front, the RBI retained its real GDP growth forecast for FY26 at 6.5%, with quarterly projections remaining unchanged. The governor noted the economy's resilience, supported by government capex, a steady monsoon, and the services sector's robustness.

Monetary Transmission and External Sector

The impact of the 100 basis points rate cut since February 2025 is still unfolding, with significant transmission to lending and deposit rates. The external sector shows a moderated current account deficit, supported by robust services exports and strong remittances, despite a higher merchandise trade deficit. Foreign exchange reserves stand at $688.9 billion, covering over 11 months of merchandise imports.

Liquidity conditions remain in surplus, with the RBI committed to flexible liquidity management to ensure smooth monetary transmission. The central bank aims to leverage the moderation in inflation to support growth while remaining vigilant on future dynamics.