India Holds Key Interest Rate; Maintains Neutral Stance

(RTTNews) - The Reserve Bank of India decided to hold its benchmark interest rates and 'neutral' stance on Wednesday as macroeconomic outlook remains resilient despite elevated geopolitical tensions.

At the meeting, the Monetary Policy Committee, governed by Sanjay Malhotra, unanimously decided to keep the policy repo rate unchanged at 5.25 percent.

The RBI has reduced the repo rate by a cumulative 125 basis points in the current easing cycle that began in February 2025.

"It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook," the bank said in a statement.

The MPC also decided to continue with the neutral stance, retaining the flexibility to respond judiciously to incoming information.

Although headline inflation remained contained and below the target, upside risks to the inflation outlook have increased, driven by energy price pressures and probable weather disturbances affecting food prices.

The bank projected CPI inflation at 4.6 percent and core inflation at 4.4 percent for 2026-27.

Policymakers observed that high frequency indicators till February indicate the continuation of strong momentum in economic activity. Nonetheless, the West Asia conflict is likely to impede growth.

The domestic economy remained resilient in 2025-26, the bank said. Growth outlook for FY26 was revised up to 7.6 percent from 7.4 percent. The economy is estimated to grow by 6.9 percent in 2026-27. The RBI acknowledged that measures taken by government to support exports and protect supply chains helped to mitigate the adverse impact of the war in Middle East.

The MPC concluded that the outbreak of the West Asia conflict adversely impacted the growth-inflation outlook, and the bank shall remain vigilant of the evolving situation and put in place policies that prioritize the best interest of the economy.