RBI keeps rates unchanged, flags inflation risks from global uncertainty

The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 5.25 per cent , maintaining a neutral policy stance amid global uncertainties and domestic inflation pressures. The decision, taken unanimously by the Monetary Policy Committee (MPC) in the first bi-monthly review of fiscal 2026-27, reflects a cautious approach to balancing growth support with price stability.

RBI Governor Sanjay Malhotra said the MPC carefully considered recent inflation trends, currency volatility, and global developments before deciding to pause. While retail inflation based on the Consumer Price Index (CPI) was 3.21 per cent in February , recent geopolitical tensions in West Asia and rising energy prices have heightened upside risks. The rupee, which hit a historic low of 95.21 against the US dollar in late March, recovered slightly to 92.56 following a ceasefire between the US and Iran, but currency swings remain a concern for import-driven inflation.

For fiscal 2026-27, the RBI projected retail inflation at 4.6 per cent , within the government-mandated target range of 4 per cent ±2 per cent. Quarter-wise estimates indicate 4 per cent in Q1, 4.4 per cent in Q2, 5.2 per cent in Q3, and 4.7 per cent in Q4 . Governor Malhotra noted that while headline inflation remains contained and core inflation pressures are muted, supply chain disruptions, energy price shocks, and potential weather-related impacts on food prices could influence future trajectories.

The central bank also revised the growth forecast, pegging GDP growth at 6.9 per cent for FY27 , slightly lower than 7.6 per cent in FY26, citing elevated commodity prices and global supply shocks as drags on domestic production. India’s foreign exchange reserves stood at USD 697.1 billion as of April 3 , covering around 11 months of imports and providing a buffer against external volatility.

The RBI signaled it will remain proactive in ensuring sufficient liquidity in the banking system to support financial stability and credit flow. Analysts say the central bank’s decision reflects a “wait-and-watch” approach , aiming to contain inflation risks while supporting growth amidst a complex global backdrop. The next MPC meeting is scheduled for June 3 to 5 , when policymakers will reassess the evolving economic and inflation outlook.