ECONOMY
RBI holds Repo Rate at 5.25% as it awaits clarity on inflation
- IBJ Bureau
- Aug 06, 2026
The Reserve Bank of India (RBI) kept the Repo Rate unchanged at 5.25 per cent for the fourth consecutive time on Wednesday.
The RBI’s six-member Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, unanimously voted to hold the benchmark policy rate and retained its “neutral” policy stance.
The central bank is assessing the impact of the US-Iran war on inflation and is awaiting clarity on the prices before deciding on the policy rate.
Headline inflation has moved above the target mainly because of higher fuel prices, while broader price pressures remain in check, RBI Governor Sanjay Malhotra said as he announced the policy.
Signalling no rush to act until there is greater clarity on inflation, Mr Malhotra reaffirmed the RBI’s “resolute” commitment to its inflation target.
Retail inflation in June rose above the central bank’s medium-term target of 4 per cent to 4.38 per cent for the first time in 17 months.
But it is projected to stay within its tolerance band of 2 to 6 per cent in the current financial year, giving policymakers breathing room on rates.
The RBI cut its forecast for average inflation in the current financial year to 5 per cent from its earlier projection of 5.1 per cent.
The forecast for core inflation, which excludes food and fuel, was slashed more steeply to 4.3 per cent from 4.7 per cent earlier.
The central bank also nudged up its growth forecast for FY27 to 6.7 per cent from 6.6 per cent, reflecting confidence in the resilient economy despite a mixed flow of incoming data.
While manufacturing activity has softened, with the purchasing managers’ index slipping to a five-year low, credit demand remains robust expanding at nearly 18 per cent.
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